Intellect Neurosciences 10-K 2009 FY Annual report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

x ANNUAL REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934:

For the fiscal year ended June 30, 2009

o TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT OF 1934

Commission file number:  333-128226

INTELLECT NEUROSCIENCES, INC.

 (Exact name of registrant as specified in its charter)

Delaware	20-2777006
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
7 West 18th Street New York, NY	10011
(Address of principal executive offices)	(Zip Code)

 (212) 448 9300

(Registrant’s telephone number, including area code) 

Securities registered pursuant to Section 12(b) of the Act:	None
Securities registered pursuant to Section 12(g) of the Act:	None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act:

Yes ¨ No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes o No x

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes xNo ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes  o.    No  o.

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Large accelerated filer  ¨	Accelerated filer  ¨
Non-accelerated filer  ¨	Smaller reporting company  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of December 31, 2008 (the last business day of the registrant’s most recently completed second fiscal quarter), the aggregate market value of the shares of common stock held by non-affiliates (computed by reference to the price at which such stock was last sold on such date as reported by the Over-the-Counter Bulletin Board) was $1,476,080.

As of September 30, 2009, there were 30,843,873 shares of common stock issued and outstanding.

Transitional Small Business Disclosure Format (Check one): Yes o No x

TABLE OF CONTENTS

		Page No.
PART I
Item 1.	Description of the Business	3
Item 1A.	Risk Factors	19
Item 2.	Properties	31
Item 3.	Legal Proceedings	31
Item 4.	Submission of Matters to a Vote of Security Holders	31
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	32
Item 6	Selected Financial Data	33
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	42
Item 8.	Financial Statements and Supplementary Data	43
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	79
Item 9A.	Controls and Procedures	79
Item 9B.	Other Information	79
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	80
Item 11.	Executive Compensation	86
Item 12.	Security Ownership of Certain Beneficial Owners, Management and Related Stockholder Matters	90
Item 13.	Certain Relationships, Related Transactions and Director Independence	91
Item 14.	Principal Accounting Fees and Services	94
PART IV
Item 15.	Exhibits, Financial Statement Schedules	95
	Exhibits Index	96
	Signatures	100

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PART I

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include our plans, goals, strategies, intent, beliefs or current expectations. These statements are expressed in good faith and based upon a reasonable basis when made, but there can be no assurance that these expectations will be achieved or accomplished. These forward looking statements can be identified by the use of terms and phrases such as “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect,” and the like, and/or future-tense or conditional constructions (“will,” “may,” “could,” “should,” etc.). Items contemplating or making assumptions about actual or potential future sales, market size, collaborations, or operating results also constitute such forward-looking statements.

Although forward-looking statements in this report reflect the good faith judgment of management, forward-looking statements are inherently subject to known and unknown risks, business, economic and other risks and uncertainties that may cause actual results to be materially different from those discussed in these forward-looking statements. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. We assume no obligation to update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report, other than as may be required by applicable law or regulation. Readers are urged to carefully review and consider Item 1A of Part I of this annual report, “Risk Factors,” beginning on page 19, and various disclosures made by us in our reports filed with the Securities and Exchange Commission, each of which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operation and cash flows. If one or more of these risks or uncertainties materialize, or if the underlying assumptions prove incorrect or inaccurate, our actual results may vary materially from those expected or projected.

Item 1.  Business

Explanatory Note: Reverse Merger

On January 25, 2007, GlobePan Resources, Inc. entered into an agreement and plan of merger with Intellect Neurosciences, Inc., a privately held Delaware corporation, and INS Acquisition, Inc., a newly formed, wholly-owned Delaware subsidiary of GlobePan Resources, Inc., which we refer to as Acquisition Sub. Pursuant to this agreement and plan of merger, on January 25, 2007, Acquisition Sub merged with and into Intellect Neurosciences, Inc., Acquisition Sub ceased to exist and Intellect Neurosciences, Inc. survived the merger and became the wholly-owned subsidiary of GlobePan Resources, Inc. We refer to this transaction as the merger. Intellect Neurosciences, Inc., the surviving entity in the merger, then changed its name to Intellect USA, Inc. and GlobePan Resources, Inc. changed its name to Intellect Neurosciences, Inc. Therefore, as of January 26, 2007, our name is Intellect Neurosciences, Inc. and the name of our wholly-owned subsidiary is Intellect USA, Inc., which wholly-owns Intellect Neurosciences (Israel) Ltd., an Israeli company. We refer to Intellect USA, Inc. as Intellect USA and we refer to Intellect Neurosciences (Israel) Ltd. as Intellect Israel.

Following the merger and after giving effect to the options we issued immediately following the merger, there were 35,075,442 shares of our common stock issued and outstanding on an actual basis and 55,244,385 shares of our common stock issued and outstanding on a fully diluted basis. In determining the number of shares of our common stock issued and outstanding on a fully diluted basis, we (i) included the aggregate 9,000,000 shares of our common stock retained by existing GlobePan stockholders, (ii) included the aggregate 26,075,442 shares of our common stock received by former holders of Intellect USA capital stock, including the former holders of Intellect USA’s Series B Preferred stock, (iii) assumed the issuance of all shares potentially available for issuance under our 2005 and 2006 stock option plans, regardless of whether such shares are currently covered by options, and (iv) assumed the conversion of all outstanding warrants, convertible preferred stock and convertible notes into shares of our common stock.

In connection with the merger, we reflected a charge for the fiscal year ended June 30, 2007 in the amount of $7,020,000, representing the shares issued to the GlobePan shareholders. We incurred this charge due to the fact that the GlobePan shareholders obtained shares of the shell company prior to the reverse merger date.

Following the merger, we exchanged the shares of our common stock received by the former holders of Intellect USA’s Series B Convertible Preferred stock in the merger for shares of a new series of our convertible preferred stock. The new Series B Convertible Preferred stock has the same designations, preferences, special rights and qualifications, limitations and restrictions with respect to our capital stock as the designations, preferences, special rights and qualifications, limitations and restrictions that the Intellect USA Series B Preferred stock had with respect to Intellect USA’s capital stock. (See Note 8 of Notes to Consolidated Financial Statements, Series B Convertible Preferred Stock.)

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We treated the Merger as a capital transaction or a recapitalization for financial accounting purposes. Intellect is treated as the acquirer for accounting purposes, whereas GlobePan is treated as the acquirer for legal purposes. Accordingly, historical financial statements of GlobePan before the Merger have been replaced with the historical financial statements of Intellect.

The parties believe they have taken all actions necessary to qualify the merger as a “tax free exchange” under Section 368 of the Internal Revenue Code of 1986, as amended.

All securities issued in connection with the Merger were “restricted” securities and are subject to all applicable resale restrictions specified by federal and state securities laws.

Unless otherwise indicated, the term “GlobePan” refers to GlobePan Resources, Inc. before giving effect to the Merger; the term “Intellect” refers to Intellect Neurosciences, Inc. before giving effect to the Merger; the terms “our company,” “we,” “us,” and “our” refer to Intellect Neurosciences, Inc. after giving effect to the Merger and related transactions, unless the context clearly indicates otherwise; and all share numbers, per share information and share price information contained in this annual Report on Form 10-K give effect to the Merger and the related transactions.

ANTISENILIN®,BETA-VAX™, OXIGON™ and RECALL-VAX™, are our trademarks. Each trademark, trade name or service mark of any other company appearing in this annual report on Form 10-K belongs to its respective holder.

Company Overview

Immediately following the Merger, Intellect’s business became our business. Through our operating subsidiary, Intellect USA, we are a biopharmaceutical company developing and advancing a patent portfolio related to specific therapeutic approaches for treating Alzheimer’s disease (“AD”). In addition, we are developing proprietary drug candidates to treat AD and other diseases associated with oxidative stress.  We have entered into license and other agreements with large pharmaceutical companies related to our patent estate, however, neither we nor any of our licensees have obtained regulatory approval for sales of any product candidates covered by our patents.

We believe, based on transactions that we have consummated with global pharmaceutical companies, that our intellectual property portfolio may limit several of our competitors in their development of Alzheimer’s disease-modifying therapeutics and may require them to take a license under our patents to commercialize certain of their products. In addition, based on our own scientific research, published data relating to our drug candidates, pre-clinical studies that we have completed and clinical studies that other pharmaceutical companies have conducted, we believe that the scientific approach outlined in our intellectual property portfolio is the pathway for developing safe and efficacious disease-modifying products to delay, arrest and ultimately prevent the onset of Alzheimer’s disease.

History

Intellect was incorporated in Delaware on April 25, 2005 under the name Eidetic Biosciences, Inc. and changed its name to Mindset Neurosciences, Inc. on April 28, 2005, to Lucid Neurosciences, Inc. on May 17, 2005 and to Intellect Neurosciences, Inc. on May 20, 2005. On January 25, 2007, we completed the merger and Intellect became our wholly-owned subsidiary and changed its name to Intellect USA, Inc. Following the merger, our sole business is the business operated by Intellect.

Business Strategy

Our core business strategy is to leverage our intellectual property estate through license or other arrangements and to develop our proprietary compounds that we have purchased, developed internally or in-licensed from universities and others, through human proof of concept (Phase II) studies or earlier if appropriate and then seek to enter into collaboration agreements, licenses or sales to complete product development and commercialize the resulting drug products. We intend to obtain revenues from licensing fees, milestone payments, development fees, royalties and/or sales related to the use of our drug candidates or intellectual property for specific therapeutic indications or applications.

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Our Therapeutic Approach

Our therapeutic approach to Alzheimer’s disease is based on developing mechanisms to prevent both the accumulation and neurotoxicity of the Alzheimer’s toxin, the so-called amyloid-beta (Aß) protein. Insight as to how amyloid beta may be implicated in Alzheimer’s disease has resulted from progress in Alzheimer’s research that has occurred over the last two decades. Dr. Chain, our Chairman and CEO, was among the first in the biotechnology industry to focus on preventing the accumulation and neurotoxicity of amyloid beta as an approach to treating and preventing Alzheimer’s disease. The amyloid beta toxin is produced in most tissues of the body as a normal product of metabolism, but accumulates in the brains of Alzheimer’s disease patients to a point where it reaches toxic concentrations. This accumulation of amyloid beta is thought to start a cascade that leads to neurodegeneration, depletion of essential neurotransmitters and memory loss. Our approach targets the top of this cascade and aims to delay, halt the progression, or prevent the onset of Alzheimer’s disease, whereas existing therapies appear to be directed at the bottom of the cascade, with the aim of causing only symptomatic improvement.

Our ANTISENILIN platform technology is based on this approach and has yielded a drug product in development that we refer to as “IN-N01”, a monoclonal antibody undergoing the humanization process. IN-N01 specifically binds to the beta amyloid toxin and is intended to prevent the accumulation and toxicity of the toxin by promoting its clearance away from sites of damage in the brain. Wyeth and Elan Pharmaceuticals are developing Bapinezumab, a monoclonal antibody of this type. We have entered into a license agreement with Wyeth and Elan Pharmaceuticals and with another top tier global pharmaceutical company and have entered into an Option and License Agreement with Glaxo Group Limited (see Material Agreements below) and are in discussions with other large pharmaceutical companies concerning a potential license of part or all of our ANTISENILIN patent estate as well as collaborations that may result in the eventual commercialization of IN-N01.

We believe, based on publicly available information, that our therapeutic approach to Alzheimer’s disease is at the forefront of potential therapeutics being developed in the pharmaceutical industry to treat Alzheimer’s disease.

Product Candidates in Development

In addition, to IN-N01, our drug candidates in development include OXIGON, a small molecule that targets the underlying pathology of the disease through a dual mode of action having both anti-oxidant and anti-fibrilogenic activity. In addition, we are in the process of identifying additional drug candidates based on our RECALL-VAX technology, which uses chimeric peptides as vaccines to immunize patients with Alzheimer’s disease or individuals who are susceptible to developing the disease because of age or other risk factors. Although there may be some overlap in the patient populations that would qualify for use of these products, we believe that the multiple genetic, biological and environmental causes of Alzheimer’s disease and different stages of the disease may require a diverse set of drug products to successfully delay, halt the progression, or prevent the onset of Alzheimer’s disease in all patients.

The following table sets forth our product candidates, the present stage of development, and the source of the underlying technology.

Product Candidate (Technology Platform)	Stage of Development	Source of Technology
OXIGON	Completed Phase I	Licensed from NYU and the University South Alabama Medical Science Foundation
IN-N01 (ANTISENILIN)	Humanized antibody	Technology assigned to Mindset BioPharmaceuticals, Inc, (“Mindset”) by its inventor Dr. Daniel Chain and by Mindset to Intellect, with additional technology acquired from MRCT, and Immuno-Biologicals Laboratory.
(RECALL-VAX)	Drug candidate selection	Technology assigned to Mindset by its inventor, Dr. Benjamin Chain, and by Mindset to Intellect.

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Overview of Alzheimer’s Disease

Alzheimer’s disease is characterized by progressive loss of memory and cognition, declining activities of daily living, neuropsychiatric symptoms or behavioral changes and ultimately complete debilitation and death. Its effects are devastating to the patient as well as caregivers, typically the family, with significant associated health care costs over an extended period of time. It is reported that approximately 40 million people suffer from Alzheimer’s disease worldwide, with the number increasing as the global population ages, to the point where it is expected that if the disease continues on its present course, by the year 2040, approximately 80 million people will suffer from the disease. Alzheimer’s disease is estimated to affect 4.5 million Americans and it is estimated that by 2050, over 16 million Americans will have Alzheimer’s disease. The annual cost of Alzheimer’s disease care in the United States is in excess of $100 billion. Medicare spends $91 billion a year on care for people with Alzheimer’s disease.

Currently available therapies only treat symptoms of Alzheimer’s disease and do not address the underlying neurodegeneration. Currently, the leading therapeutic agents for Alzheimer’s disease include AriceptTM (donepezil), an acetylcholinesterase inhibitor approved in 1996 and marketed by Pfizer, Inc. and Esai, and NamendaTM (memantine), an N-methyl-D-aspartate receptor antagonist marketed by Forest Laboratories in the United States and H. Lundbeck and Merz Pharmaceuticals in Europe. Aricept is the leader among anti-Alzheimer’s disease drugs, with $3.6 billion in estimated worldwide sales in 2008. Clearly, the Alzheimer’s disease space represents a multi-billion dollar potential market. It is dominated by a handful of companies that have succeeded in launching highly successful but, we believe, relatively ineffective drugs. We believe that our approach, which is to develop anti-Alzheimer’s disease drugs that attack the underlying pathology of the disease, should position us to be a formidable entrant into and participant in this market.

The scientific and medical community generally concurs that Alzheimer’s disease is caused by the formation of highly toxic protofibrils of the amyloid-beta protein that accumulate in the brain and eventually deposit as plaques. The overproduction of the amyloid-beta protein in certain hereditary forms of the disease and the inability of the aging brain to rid itself of the protein after it is formed starts a molecular cascade causing oxidative stress, inflammation and ultimately the death of brain cells, leading to the symptoms of Alzheimer’s disease. In forming our company, Dr. Chain sought to identify complementary technologies that could address the underlying cause of Alzheimer’s disease from a variety of perspectives, recognizing that a single approach is unlikely to work for the entire patient population. At the same time, multiple technologies are attractive because they give rise to multiple product and partnering opportunities both within and outside the Alzheimer’s disease field (i.e., other oxidative stress indications and other diseases of amyloidosis).

We seek to obtain revenues from the licensing of our intellectual property for drug candidates under development by other pharmaceutical companies. In addition, we seek to enter into drug development collaborations to obtain revenues from signing fees and milestone payments before our products reach Food and Drug Administration (“FDA”) approval and royalties from product sales following such approval.

Our Immunotherapy Platform Technologies

Our immunotherapy platforms aim to prevent the accumulation of aggregated beta amyloid protein fragments in the brain that are thought to be the root cause of Alzheimer’s disease. In healthy people, beta amyloid does not aggregate, but in Alzheimer’s patients it clumps first to form long fibrils, like tentacles, that eventually deposit on the surface of nerve cells as a spaghetti-like protein mass called amyloid plaques. The beta amyloid fragments are generated as a product of metabolism from the much larger Amyloid Precursor Protein, which is present in most tissues in the body and implicated in numerous important physiological functions. Intellect’s immunotherapy approach for Alzheimer’s disease involves making an antibody molecule available to bind to the beta-amyloid toxin, thus promoting its clearance away from sites of damage in the brain. This therapeutic outcome potentially can be achieved either by administering an externally generated monoclonal antibody (passive immunization) or by provoking the patient’s immune system to generate such an antibody (active immunization). Both approaches have the potential to slow or arrest disease progression provided that key safety issues are addressed. Of particular importance, is the need to avoid interfering with the physiological roles of the Amyloid Precursor Protein.  Intellect has incorporated proprietary safety features into its ANTISENILIN monoclonal antibody and RECALL-VAXtechnology platforms for both passive and active immunization, respectively, to minimize the potential for adverse side-effects, by generating antibodies that bind only the toxic beta amyloid and not the Amyloid Precursor Protein. We believe that these features and supporting patent position provides us with a strong potential competitive advantage in this field.

 Both active and passive immunization approaches have been demonstrated in transgenic Alzheimer’s disease mouse models to prevent amyloid beta deposition. In addition, published human clinical trial data from various trials sponsored by major pharmaceutical companies provide additional support for these approaches, though both approaches have potential safety concerns. We have amassed a portfolio of patents and patent applications in several technologies addressing an immunotherapy approach to treating Alzheimer’s disease in an effective and safe manner.

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Passive Immunotherapy - Our ANTISENILIN Program

Our passive monoclonal antibody platform is called ANTISENILIN, which was invented by our Chairman and CEO, Dr. Daniel Chain. We believe that product candidates emerging from this technology platform will result in a reduced potential to generate an adverse inflammatory reaction in patients; and a high degree of specificity such that the antibodies generated are less likely to bind to and affect the function of physiologically important proteins.

We acquired a monoclonal antibody from Immuno-Biological Laboratories Co., Ltd. (“IBL”), which has been humanized by MRCT (see Material Agreements below). We refer to the humanized drug candidate as IN-N01. We anticipate entering IN-N01 into human Phase I clinical trials in 2010 if we have sufficient financial resources.  The ANTISENILIN passive immunotherapy program involves designing antibodies that attack only the toxic version of amyloid beta without binding to other structurally related proteins and interfering with their important physiological functions. Published material has shown that generation of antibodies against amyloid beta is effective in slowing progression of Alzheimer’s disease.  The advantages of the passive approach are that it bypasses the need for patients to trigger their own immune response to generate antibodies, which could be particularly difficult for Alzheimer’s disease patients who tend to be elderly and who lack the ability to generate a robust immune response; allows the antibodies to be designed ex vivo with the required specificity rather than relying on the patient’s immune system; and retains the ability to halt treatment if necessary by ceasing the administration of antibodies whereas once the immune system has begun generating the antibodies, it is harder to “turn off” the immune response.

The specificity of IN-N01, which binds all major classes of circulating and pharmacokinetics profiles, makes it an ideal candidate for passive immunization. Additional modifications of the molecule are being made to further increase its safety profile.

Wyeth and Elan Pharmaceuticals are developing Bapinezumab, a monoclonal antibody of this type. Also, other pharmaceutical companies are developing or wish to develop similar antibodies. We have entered into a license agreement with Wyeth and Elan Pharmaceuticals, an option and license agreement with Glaxo and a license agreement with another top tier global pharmaceutical company   (see Material Agreements below).

Active Immunotherapy - Our RECALL-VAX Program

RECALL-VAX is a platform technology for developing a vaccine that could potentially be used as a form of active immunization to treat people with Alzheimer’s disease or prevent or delay the onset of the disease in individuals that are susceptible through age or other risk factors. We believe product candidates based on the RECALL-VAX technology will result in reduced potential to generate an adverse auto-immune response in patients; reduced toxicity compared to the natural amyloid beta protein; and a high degree of specificity such that the antibodies generated are less likely to bind to and affect the function of physiologically important proteins. RECALL-VAX was developed by Dr. Benjamin Chain of the University College of London. Dr. Benjamin Chain is the brother of our Chairman and Chief Executive Officer, Dr. Daniel Chain.

Other vaccines have shown in animal and limited human studies that antibodies generated by the immune system can help prevent the accumulation of toxic amyloid beta protein in the brain, but that such vaccines produce adverse side-effects thought to be due to the generation of a strong inflammatory auto-immune response. Elan Pharmaceuticals and Wyeth conducted a trial of an amyloid vaccine (AN1972) that was suspended in January 2002 because of safety concerns arising from an autoimmune response in 18 out of 360 patients that triggered post-vaccination meningeal encephalitis. RECALL-VAX is designed to reduce or eliminate an autoimmune response and to ensure that the antibodies produced by the patient’s immune system only attack the amyloid beta protein, thereby significantly reducing the likelihood of side-effects.

We believe the key to inactivation of amyloid beta toxin by vaccination is to stimulate a strong antibody immune response that targets and inactivates the toxin. However, strong antibody responses require parallel stimulation of cellular immunity in the form of antigen-specific T-helper lymphocytes. Although amyloid beta itself contains elements (epitopes) that can stimulate T-cell immunity, such T-cell responses carry the risk of inducing harmful autoimmunity. In our patented RECALL-VAX technology, a safe and well-characterized T-cell epitope polypeptide, such as tetanus toxoid (against which most people have been vaccinated), is combined with a very short fragment of amyloid beta toxin to produce the combined RECALL-VAX vaccine. We believe that our particular combination of human amyloid beta and bacterial (tetanus toxoid) polypeptides to provide B and T-helper epitopes, respectively, encourages a robust immune response with lessened danger of contamination by potentially harmful human amyloid beta T-cell epitopes. Moreover, by using only very short fragments of the amyloid beta toxin, the immune response is more specific than when using full length or larger pieces of amyloid beta, ensuring that only the toxin and not the amyloid precursor protein is targeted by the antibody.

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Our intent is to screen several different chemical variants for optimal immune responses with the goal of selecting a clinical candidate for development if we obtain sufficient financial resources. We have established proof of principle of the approach in animal tests using a proprietary chimeric structure to elicit an antibody response to a fragment protein, which includes a particularly potent form of the toxin that has been observed in neuronal cultures and in the brains of patients who died of Alzheimer’s disease.

Small Molecules - Our OXIGON Program

OXIGON is our drug candidate that is most advanced in clinical trials. It is a chemically synthesized form of a small, potent, dual mode of action, naturally occurring molecule. OXIGON is unique because it exhibits both anti-amyloid and antioxidant properties. It has potential use for Alzheimer’s disease and other diseases caused by oxidative stress and/or amyloidosis. Such diseases include, for example, Parkinson’s disease, Huntington’s disease, diabetes, focal ischemia, stroke, toxic neuropathy, motor neuron disease, heart and cardiovascular diseases, and radiation damage. Some of these diseases are orphan drug indications that could provide a more rapid route to registration than the route required for the Alzheimer’s disease indication.

OXIGON was previously under development at Mindset Biopharmaceuticals, Inc. (“Mindset”), partly with federal and private financial support from the National Institute of Aging, the BIRD Foundation, a bi-national quasi-governmental organization sponsored by the United States and Israel, and the Institute for the Study of Aging, a philanthropic organization in New York. We acquired the technology from Mindset in 2005. Our rights in the intellectual property underlying OXIGON are licensed from New York University (“NYU”) and the University of South Alabama Medical Science Foundation (“SAMSF”). Under the agreements with these institutions, we have an exclusive, worldwide, royalty-bearing license, with the right to grant sublicenses relating to OXIGON. NYU and SAMSF reserve the right to use and practice the licensed patents and know-how for their own non-commercial, educational or research purposes and to distribute certain research materials to third parties for non-commercial uses. Under the agreements, we have the first right to enforce the underlying intellectual property against unauthorized third parties. OXIGON sales are subject to royalties due to NYU and SAMSF, and to a royalty obligation arising from the use of test animals licensed to Mindset in drug discovery under a non-exclusive royalty bearing license from the Mayo Foundation for Medical Education and Research (“Mayo”).

In various in vitro and in vivo studies, OXIGON has shown the potential to be a potent neuroprotectant against amyloid beta and other toxins and a powerful antioxidant without pro-oxidant activity. In addition, it has shown the potential to inhibit amyloid beta fibril formation; reduce plaque burden and improve cognition (in Alzheimer’s disease transgenic mice); and protect DNA from oxidative damage.

These neuroprotective and antioxidant properties make OXIGON a promising therapeutic candidate for development in Alzheimer’s disease and other disorders characterized by oxidative stress. These diseases include central nervous system indications, such as Parkinson’s disease, stroke, traumatic brain injury, Huntington’s disease, ataxia telangiectasia and autism and non-central nervous system indications, such as multiple sclerosis, motor neuron disease, cardiac disease, ionization radiation injury, chemotherapy side-effects and others.

OXIGON was approved for testing in human clinical Phase I trials by the Ethics Committee in Utrecht, the Netherlands, on October, 28, 2005 and entered human Phase I clinical trials on December 1, 2005 in The Netherlands. The purpose of the first administrations of OXIGON to humans in our Phase I clinical trials was to determine safety and tolerability of OXIGON; identify adverse events associated with the drug and its formulation and determine their possible dose relationship; establish pharmacokinetic and pharmacodynamic profiles of OXIGON; and identify the maximum tolerated dose in single and multiple dose administrations.

We completed our Phase Ia trial on March 22, 2006 in a total of 54 subjects. We demonstrated in this clinical trial that OXIGON is safe and well tolerated in healthy elderly subjects in single doses up to 1200 mg; the absorption of OXIGON is rapid; the pharmacokinetics appear to be linear over the dose range studied; and the half life is three to four hours in plasma.

Following successful completion of our Phase Ia trial, OXIGON was approved for testing in human clinical Phase Ib trials by the Ethics Committee in Utrecht, the Netherlands on July 24, 2006, and this study, testing multiple doses of OXIGON over a fourteen day period, commenced on September 1, 2006. The study was completed on November 15, 2006 in a total of 36 subjects and initial data demonstrated that OXIGON is safe and well tolerated in healthy elderly subjects receiving multiple doses of OXIGON of up to 800 mg daily over a fourteen day period and shows linear pharmacokinetics in blood following oral administration. We received the final report for the Phase Ia trial and will receive the final report related to the Phase Ib trial upon final payment to our Contract Research Organization.

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Additional non-clinical studies were carried out in support of conducting planned Phase II trials. These non-clinical studies included toxicology in rats and non-human primates. The 90 day rat study was conducted by the Biosciences Division of SRI International, Menlo Park, California, under a contract with the National Institute on Aging, part of the National Institutes of Health.  This contract is part of a federal effort to work with academia and the private sector to encourage the discovery and development of drugs for Alzheimer’s disease.  The second study was performed by a company in the UK under contract to Intellect.

We intend to initiate a Phase II trial for OXIGON in 2010 if we have sufficient financial resources. The objective of our planned Phase IIa trial in AD is to generate sufficient proof of concept data to attract a partner for a pivotal Phase II/III clinical trial. Our study design is based on a previous trial design for OXIGON developed by the Alzheimer’s Disease Cooperative Study (ACDS), a consortium of academic institutions with research focused on AD. Our goal is to demonstrate changes in relevant biomarkers in cerebrospinal fluid (“CSF”) and plasma and possibly changes in cognitive outcomes. We believe that our study design allows us the potential for statistically significant data with fewer patients and treated for a shorter duration than in trials relying solely on cognition outcomes

We believe that OXIGON’s dual mode of action gives it the potential to treat any disease which is caused by either “amyloidosis,” the toxic accumulation of abnormally sticky proteins, and/or “oxidative stress”. In addition to the disease indications mentioned above, the list of diseases associated with amyloidosis and/or oxidative stress includes: aging disorders, heart and cardiovascular disease, diabetes, gastrointestinal tract diseases, other central nervous system disorders, certain inflammatory diseases, radiation damage, chemotherapy-related cell damage and others. Vitamin E has often been mentioned as a potent antioxidant. Yet its ability to effectively treat oxidative damage has been relatively limited, as has been the case with many other antioxidants that generally have poor bioavailability in the brain and/or adverse effects caused by the formation of damaging metabolites, particularly metabolites that have pro-oxidant activity. In contrast to most other antioxidants, OXIGON appears to be accessible to the brain and does not form any pro-oxidant metabolites. In vitro studies have shown that OXIGON protects cells against several potent neurotoxins, including Alzheimer’s toxin amyloid beta, and protects against DNA damage by oxidation, leading us to believe that OXIGON has the potential to treat Alzheimer’s disease and other diseases caused or promoted by oxidative damage.

In published research, OXIGON was found to be a potent antioxidant both in vitro and in vivo and a protectant of nerve cells from amyloid beta induced toxicity. The measurements obtained in the in-vitro studies indicated that the drug candidate is several orders of magnitude more potent than Vitamin E as a scavenger of so-called OH-radicals, which are a particularly damaging source of free radicals known to cause severe damage to cells. Similar studies also showed that in contrast to such other well-known antioxidants, including close structural analogs such as indole-3-pyruvic acid and indole-3-acetic acid, OXIGON cannot be metabolized to yield pro-oxidant intermediates whereas Vitamin E and many other antioxidants break down into “pro-oxidant” metabolites that tend to neutralize their effect in the body. In other studies carried out by researchers, OXIGON was shown to protect the brain from numerous potent neurotoxins in animal models of Parkinson’s disease, Huntington’s disease, focal ischaemia, toxic neuropathy and Alzheimer’s disease.

In addition to its antioxidant properties, OXIGON shows the potential to have anti-fibrillogenic properties, such as the ability to prevent the formation of the protofibrils and amyloid plaques that cause much of the damage in Alzheimer’s disease patients. OXIGON has been tested for safety across species, including primates, and found safe for testing in humans under applicable European regulatory guidelines. We believe that these properties, coupled with its bioavailability, as demonstrated in animal models, and recently in humans, including uptake across the gut and from the blood into the brain, should make OXIGON an attractive candidate to treat Alzheimer’s disease, as well as many of the oxidative stress related diseases. Although primarily we are focused on Alzheimer’s disease, if sufficient funding is available, we expect to conduct additional testing eventually, either alone or with partners, in other indications where clinical trials designed to show efficacy may be significantly shorter and less expensive than clinical trials for Alzheimer’s disease.

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In connection with our purchase of OXIGON from Mindset, we obtained data related to certain initial research activities that were undertaken by Mindset and that were suggestive of efficacy of OXIGON as an anti-Alzheimer’s disease drug in animals. Specifically, OXIGON was previously tested in a so-called double transgenic mouse model of Alzheimer’s disease. The mouse is double transgenic because it contains in its genome two mutant human genes each of which, in humans, gives rise individually to a form of familial early onset Alzheimer’s disease. Several pharmaceutical companies have tested compounds in this model because it is considered relevant to Alzheimer’s disease. A preliminary exploratory study was conducted in these mice to investigate the efficacy of OXIGON in preventing or delaying amyloid beta burden and improving memory. The design of this exploratory study included a wide range of OXIGON doses to find a pharmacologically active dose in this model, as well as multiple assays to determine which, if any, was appropriate to further test the effect of OXIGON. A behavioral test, known as trace conditioning, was used to evaluate the effects of OXIGON on learning/memory in a subset of the transgenic mice enrolled in the study. Use of OXIGON (10 mg/kg) resulted in better cognition than that exhibited by placebo-treated double transgenic mice when tested 24 hours after training following 17 weeks of drug administration. OXIGON also was tested in an enzyme-linked immunosorbent assay using specific antibodies to measure the total amyloid beta peptides extracted from brain homogenates. These assays revealed effects of OXIGON in both the eight and 17-week treatment periods. At certain doses, animals treated with OXIGON showed reductions of more than 80% in the amount of brain amyloid species (1 to 40), and 30% reductions in the amount of brain amyloid species (1 to 42). However, OXIGON was not effective at all doses and we intend to conduct further studies to determine the effective dose if sufficient funding is available. Some of the biological tests applied in this exploratory study failed to show significant changes between treated and untreated animals. We believe that tests that did not show significant changes were of insufficient sensitivity and were unsuited to this type of study, but there is no assurance that our belief will prove accurate.

Material Agreements

Mindset Asset Transfer Agreement

The majority of Intellect’s assets were acquired in 2005 from Mindset Biopharmaceuticals, Inc., which we refer to as Mindset. Dr. Daniel Chain, our Chairman and Chief Executive Officer, founded Mindset and remains a significant stockholder of Mindset. He had previously served as Mindset’s Chairman and Chief Executive Officer, and currently serves as its President. Dr. Chain spends approximately 5% of his time on matters relating to Mindset. Mindset is not involved in any business that competes, directly or indirectly, with the business of Intellect.

Effective June 23, 2005, Intellect entered into an agreement (the “Asset Transfer Agreement”) with Mindset to acquire from Mindset certain intellectual property related assets (the “Mindset Assets”), including their related patents, patent applications, trademarks, licenses, know-how inventions and certain inventories (the “2005 Asset Transfer”).

Pursuant to the Asset Transfer Agreement, Mindset sold, assigned, conveyed and transferred to Intellect the Mindset Assets. As consideration for the Mindset Assets, Intellect agreed to:

• purchase from Mindset’s creditors $1,277,438 of Mindset debt in exchange for a release of the claims against Mindset held by such creditors;

• purchase from Mindset’s wholly owned Israeli subsidiary, Mindset Biopharmaceuticals, Ltd. (“Mindset Ltd.”), $743,282 of Mindset debt at a price to be determined based on negotiations with the trustee in bankruptcy in Israel of Mindset Ltd, which price was determined to be $150,00;

• purchase from certain of Intellect’s officers and stockholders $1,634,000 of Mindset debt in exchange for a release of the claims against Mindset held by such officers and stockholders;

• assume $1,623,730 of Mindset debt owed to third parties;

• pay $60,405 to third parties for certain research and development costs previously incurred by Mindset; and

• assume the obligations of Mindset under certain licenses that would be assigned to us pursuant to the 2005 Asset Transfer.

As a result of the transactions described above, we are a significant creditor of Mindset. Mindset’s current business plan is to leverage its intellectual property estate through licenses and other arrangements and to provide transgenic mice for Alzheimer’s disease research through its existing subsidiary, Mindgenix, Inc. (“Mindgenix). Although it is possible that Mindset will become a profitable entity in the future, we believe that we are unlikely to recover any significant repayment of amounts due to us from Mindset. Therefore, we have fully offset this receivable by a reserve due to uncertainty regarding collection. Under the Asset Transfer Agreement, in the event of certain acceleration events, such as the liquidation, dissolution or institution against or by Mindset of bankruptcy proceedings, approximately $2.9 million of Mindset debt owed to us will become immediately due. If no such acceleration event has occurred on or before December 31, 2013, the $2.9 million of Mindset debt will be extinguished. No such bankruptcy proceedings have been instituted by or against Mindset as of the date of this report and we have no basis to assume that any such proceedings are likely to occur in the foreseeable future.

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Agreements Related to our Immunotherapy Programs

Beta-Amyloid Specific, Humanized Monoclonal Antibody Purchase and Sale Agreement (ANTISENILIN)

Under the terms of a Beta-Amyloid Specific, Humanized Monoclonal Antibody Purchase and Sale Agreement (the "IBL Agreement") effective as of December 26, 2006 by and between Intellect USA and Immuno-Biological Laboratories Co., Ltd. ("IBL"), we acquired a beta amyloid specific monoclonal antibody ready for humanization, referred to as 82E1, including all lines and DNA sequences pertaining to it, and the IBL patents or applications relating to this antibody. We also acquired a second monoclonal antibody referred to as 1A10, the DNA sequence pertaining to it and the IBL patents or applications relating to this antibody. The Agreement requires an upfront payment of $50,000, which was subsequently reduced to $40,000, which we paid in March 2008.

In consideration for the purchase, we agreed to pay IBL a total of $2,125,000 (including the $40,000 referred to above) upon the achievement of certain milestones plus a specified royalty based on sales of any pharmaceutical product derived from the 82El or 1A10 antibodies. Also, we granted to IBL a worldwide, exclusive, paid-up license under certain Intellect granted patents and pending applications in Japan, to make, use and sell certain beta amyloid specific monoclonal antibodies solely for diagnostic and/or laboratory research purposes. The IBL Agreement expires upon the last to expire of the relevant Intellect patents, unless earlier terminated as the result of a material breach by or certain bankruptcy related events of either party to the agreement.

Medical Research Council Technology (“MRCT”) Research Collaboration Agreement (ANTISENILIN)

MRCT and Intellect entered into a Research Collaboration Agreement effective as of August 6, 2007 and amended on June 19, 2008 (the “Collaboration Agreement”) pursuant to which MRCT agreed to conduct a project to humanize Intellect’s beta-amyloid specific, monoclonal antibodies for the treatment of Alzheimer’s disease.  The first antibody to undergo humanization is 82E1, the antibody that we acquired from IBL. Humanization is an essential step in making antibodies safe for use in humans. We refer to the humanized form of 82E1 as IN-N01.

Under the terms of the Research Collaboration Agreement as amended, we are obligated to pay MRCT up-front fees and research milestone payments related to the development of the 82E1 humanized antibody and additional commercialization milestones and sales based royalties related to the resulting drug products. As of June 30, 2009, we have paid to MRCT a total of $200,000 of up-front fees, and none of the research milestones. Under the June 19, 2008 amendment, we may deliver warrants to purchase our common stock in lieu of cash payments under certain circumstances related to our future financing activities as payment for research milestone payment obligations. Three of the five research milestones have been achieved and as a result, a liability reflecting research milestone payment obligations outstanding is included in Accounts Payable and Accrued Expenses.

License Agreement among Intellect and AHP Manufacturing BV, acting through its Wyeth Medica Ireland Branch and Elan Pharma International Limited (ANTISENILIN)

In May 2008, we entered into a License Agreement (the “Agreement”) by and among Intellect and AHP Manufacturing BV, acting through its Wyeth Medica Ireland Branch, (“Wyeth”) and Elan Pharma International Limited (“Elan”) to provide Wyeth and Elan (the “Licensees”) with certain license rights under certain of our patents and patent applications (the “Licensed Patents”) relating to certain antibodies that may serve as potential therapeutic products for the treatment for Alzheimer’s Disease (the “Licensed Products”) and for the research, development, manufacture and commercialization of Licensed Products.

Pursuant to the Agreement, we granted the Licensees a co-exclusive license (co-exclusive as to each Licensee) under the Licensed Patents to research, develop, manufacture and commercialize Bapineuzumab Products in the Field in the Territory (all as defined in the Agreement) and a non-exclusive license under the Licensed Patents to research, develop, manufacture and commercialize Licensed Products (other than Bapineuzumab Products) in the Field in the Territory.  We received $1 million as of June 30, 2008 and an additional $1 million in August, 2008 pursuant to this Agreement. In addition, we are eligible to receive certain milestones and royalties based on sale of Licensed Products as set forth in the Agreement. The term during which royalties would be payable is determined based on a country-by-country and Licensed Product-by-Licensed Product basis, the period beginning upon the first commercial sale of a Licensed Product in a country and ending on the first date that such Licensed Product ceases to be covered by a Valid Claim issued in such country.

Under the terms of the License Agreement, the Licensees have an option to receive ownership of all of our right, title and interest in and to the Licensed Patents if at any time during the term of the Agreement (i) Licensor and its sublicensees have abandoned all activities related to research, development and commercialization of all Intellect Products that are covered by the Licensed Patents and (ii) no licenses granted by Licensor under the Licensed Patents (other than the licenses granted to Licensees under the Agreement) remain in force. “Abandonment” includes a failure by Intellect to incur $50,000 in patent or program research related expenses during any six month period that the Agreement is in effect. Accordingly, initially we recorded the up-front payment of $1 million received from the Licensees as a Deferred Credit on our Consolidated Balance Sheet, representing our obligation to fund such future patent or program research related expenses, and recorded periodic amortization expense related to the deferred credit based on the remaining life of the License, which approximates the remaining life of the underlying patents.

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As described more fully below, in October 2008 we entered into an Option and License Agreement with a top-tier global pharmaceutical company regarding an option to purchase a license under certain patents. The patents are the same patents and patent applications as the Licensed Patents arising from the Agreement with Elan and Wyeth described above.  Effective as of December 19, 2008, we granted a License to the counterparty to this Agreement.  As a result, Wyeth and Elan’s option to receive ownership of all of our right, title and interest in and to the Licensed Patents described above terminated as of December 19, 2008. Accordingly, we recognized the remaining balance of the deferred credit as income during the period ended December 31, 2008.

ANTISENILIN Option and License Agreement

In October 2008, we entered into an Option Agreement (the “Option Agreement”) by and among Intellect and a global pharmaceutical company (“Option Holder”) regarding an option to obtain a license under certain of our patents and patent applications (the “Subject Patents”) related to antibodies and methods of treatment for Alzheimer’s disease and to make, have made, use, sell, offer to sell and import certain Licensed Products, as defined in the Agreement.

Pursuant to the Agreement, we granted the Option Holder an irrevocable option to acquire a non-exclusive, royalty bearing license under the Subject Patents with the right to grant sublicenses, to develop, have developed, make, have made, use, offer to sell, sell, import and have imported Licensed Products in the Territory in the Field (the “Option”).

In consideration of the Option, the Option Holder paid us a non-refundable fee of five hundred thousand dollars ($500,000) (the “Option Fee”). In consideration of the exercise of the Option, the Option Holder agreed to pay us two million dollars ($2,000,000) (the “Exercise Fee”). Two hundred and fifty thousand dollars ($250,000) of the Option Fee is creditable against the Exercise Fee.

In addition, upon the later of (1) exercise of the Option, and (2) grant in the United States of a Licensed Patent with at least one Valid Claim that covers a Licensed Product in the Territory in the Field (as such terms are defined in the Agreement), we will receive two million U.S. dollars (U.S. $2,000,000). An additional milestone payment shall be made to us should the Option Holder achieve certain thresholds for aggregate annual Net Sales for any Licensed Product in countries in which there are then existing one or more Valid Claims covering the Licensed Product.

The Agreement also provides that we will be eligible to receive certain royalty payments from the Option Holder in connection with Net Sales of Licensed Products by the Option Holder, its affiliates and its permitted sublicensees. The term during which such royalties would be payable begins upon launch of a Licensed Product in a country (or upon issuance of a Valid Claim, whichever is later) and ending upon the date on which such Licensed Product is no longer covered by a Valid Claim in such country (as such terms are defined in the Agreement).

Effective as of December 19, 2008, the Option Holder became the Licensee of the Subject Patents by paying us $1,550,000, which is the Exercise Fee described in the Option Agreement as adjusted by subsequent discussions between the parties to the Option Agreement. We recognized the $1,550,000 exercise fee and the $500,000 non refundable option fee described above as revenue in the period of receipt on our financial statements.

GSK Option and License Agreement

On  April 29, 2009, we entered into an Option Agreement (the “Agreement”) with Glaxo Group Limited (“GSK”) regarding an option to purchase a license under certain of Intellect’s patents and patent applications (the “Subject Patents”) related to antibodies and methods of treatment for Alzheimer’s disease.

Pursuant to the Agreement, we granted GSK an irrevocable option (the “Option”) to acquire a non-exclusive, royalty bearing license under the Subject Patents with the right to grant sublicenses, to develop, have developed, make, have made, use, offer to sell, sell, import and have imported Licensed Products in the Territory in the Field (as such terms are defined in the Agreement).

Upon exercise of the Option, GSK will pay us two million dollars ($2,000,000). In addition, upon the later of the (1) exercise of the Option, and (2) grant in the United States of a Licensed Patent with at least one Valid Claim that covers a Licensed Product incorporating a GSK Compound in the Territory in the Field (as such terms are defined in the Agreement), GSK will pay us an additional two million U.S. dollars (U.S. $2,000,000). An additional milestone payment will be made to us should GSK achieve certain thresholds for aggregate annual Net Sales for any Licensed Product in countries in which there are then existing one or more Valid Claims covering the Licensed Product.

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The Agreement provides that we will be eligible to receive certain royalty payments from GSK in connection with Net Sales of Licensed Products by GSK, its affiliates and its permitted sublicensees. The term during which such royalties would be payable begins upon launch of a Licensed Product in a country (or upon issuance of a Valid Claim, whichever is later) and ending upon the date on which such Licensed Product is no longer covered by a Valid Claim in such country (as such terms are defined in the Agreement).

Dr. Benjamin Chain — Chimeric Peptide Assignment Agreement (RECALL-VAX)

Effective as of June 6, 2000, Dr. Benjamin Chain assigned to Mindset all of his right, title and interest in certain of his inventions and patent applications related to the use of chimeric peptides for the treatment of AD. Dr. Benjamin Chain is the brother of our Chairman and Chief Executive Officer.  In exchange for such assignment, Mindset agreed to pay a royalty to Dr. Benjamin Chain equal to 1.5% of net sales of any drug products sold or licensed by Mindset utilizing the chimeric peptide technology. Intellect USA acquired these inventions and patent applications as part of the asset estate that we acquired from Mindset and we are obligated to make royalty payments to Dr. Benjamin Chain upon successful development of a drug utilizing this chimeric peptide technology. We have yet to develop any drug product that would trigger our obligation to make future payments to Dr. Benjamin Chain.

New York University License Agreement – BETA-VAX (terminated)

On August 31, 2005, Intellect USA entered into an Option Agreement with New York University for an option to license certain NYU inventions and know-how relating to a vaccine for the mitigation, prophylaxis or treatment of AD.  Under the Option Agreement, we were entitled to acquire an exclusive, worldwide license to commercially use NYU's inventions and know-how in the development of products for use in the mitigation, prophylaxis or treatment of AD.  NYU retained the right to use the inventions and know-how for its own academic and research purposes and to allow other academic institutions to use the inventions and know-how for their academic and research purposes other than clinical trials, as well as any rights of the United States government. In addition, we agreed to reimburse NYU for certain patent protection costs and expenses incurred by NYU. Patent costs were expensed as incurred to general and administrative costs.  Intellect USA exercised the option to acquire the license on April 1, 2006 and entered into a License Agreement with NYU on April 21, 2006.

Under the terms of the License Agreement, we were obligated to pay non-refundable, non-creditable license fees totaling $200,000, payable in five installments as follows: $25,000 on each of May 1 and June 1, 2006 and $50,000 payable on each of April 1, 2007, 2008 and 2009. We did not pay the license payments due on April 1, 2007 or April 1, 2008. The Agreement did not provide for interest payments; consequently, the principal payments have been discounted to their present value at an annual interest rate of 10%, resulting in a principal amount of approximately $172,700 and imputed interest of approximately $27,300 at the time of execution of the License Agreement. As of June 30, 2009, the approximate remaining balance due to NYU in respect of the License Agreement, including accrued interest for 2007 and 2008 is $145,260, which is included in Accounts Payable and Accrued Expenses as Due to Licensors on our Consolidated Balance Sheet.

In addition, we were obligated to pay NYU non-refundable research payments for performance by NYU of certain ongoing research activities totaling $200,000, payable in eight equal installments of $25,000 every three-months beginning on April 1, 2006. We paid $150,000 of such payments and are delinquent with respect to the balance. Also, we were obligated to make future payments totaling approximately $2,000,000 upon achievement of certain milestones based on phases of clinical development and approval of the FDA (or foreign equivalent) and also to pay NYU a royalty on the sales, net of various customary discounts, attributable to each licensed product. As a result of the payment delinquencies and a decision by Intellect’s management to focus on its core programs, Intellect agreed with NYU on December 24, 2008 to the cancellation of the Licensing Agreement, resulting in the termination of the license from NYU to Intellect. We remain obligated to pay NYU the outstanding amounts due under the License Agreement through the date of termination.

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Agreements Related to OXIGON

New York University (NYU) License Agreement- Melatonin and indole-3-propionic acid

Effective August 10, 1998 as amended in September 2002, Mindset entered into a license agreement with NYU. On June 17, 2005, in connection with the 2005 Asset Transfer, NYU consented to Mindset’s assignment of the license agreement to us. Under the license agreement, we have an exclusive, worldwide, royalty-bearing license in the field of research, development and testing within pharmaceutical, biotechnological and diagnostic development programs in the field of Alzheimer’s disease and other central nervous system and neurodegenerative diseases, and in the field of all other possible utilities for melatonin analogs, with the right to grant sublicenses, under certain patents and know-how relating to the use of melatonin and melatonin analogs in the prevention or treatment of amyloid-related disorders and in the use of melatonin analogs as antioxidants and to the use of indole-3-propionic acid to prevent a cytotoxic effect of amyloid-beta protein, treat a fibrillogenic disease, including Alzheimer’s disease, or generally treat a disease or condition where free radicals and/or oxidative stress contribute to pathogenesis. Under the agreement, we have the first right to enforce the underlying intellectual property against unauthorized third parties. The license agreement is expressly subject to all applicable United States government rights. The license agreement expires upon the expiration date of the last to expire patent or 15 years from the date of first commercial sale of products, whichever is later. We are obligated to make future payments totaling approximately $1,500,000 upon achievement of certain milestones based on phases of clinical development and approval of the FDA (or foreign equivalent) and also to pay NYU a royalty based on product sales by us or royalty payments that we receive from sub-licensees. We have yet to achieve the clinical development or FDA approval milestones that trigger our obligation to make future payments.

University of South Alabama Medical Science Foundation (“SAMSF”) — Research and License Agreement- Melatonin and indole-3-propionic acid

Effective August 10, 1998 and as amended as of September 1, 2002, Mindset entered into a Research and License Agreement with the South Alabama Medical Science Foundation (the "SAMS Foundation").  On June 17, 2005, SAMS Foundation consented to Mindset's assignment of the Research and License Agreement to Intellect USA.  Under the Research and License Agreement, we have an exclusive, worldwide, royalty-bearing license, with the right to grant sublicenses, under certain patents and know-how relating to the use of melatonin and melatonin analogs in the prevention or treatment of amyloid-related disorders and in the use of melatonin analogs as antioxidants and to the use of indole-3-propionic acid to prevent a cytotoxic effect of amyloid-beta protein to treat a fibrillogenic disease, including AD, or generally to treat a disease or condition where free radicals and/or oxidative stress contribute to pathogenesis.  Under the agreement, we have the first right to enforce the underlying intellectual property against unauthorized third parties. The license agreement is expressly subject to all applicable United States government rights. The license agreement expires upon the expiration date of the last to expire patent or 15 years from the date of first commercial sale of products, whichever is later. We are obligated to make future payments totaling approximately $1,500,000 upon achievement of certain milestones based on phases of clinical development and approval of the FDA (or foreign equivalent) and also to pay SAMS Foundation a royalty based on product sales based on product sales by us or royalty payments that we receive from sub-licensees. We have yet to achieve the clinical development or FDA approval milestones that trigger our obligation to make future payments.

Mayo Foundation for Medical Education and Research (“Mayo”) — Transgenic Animal Non-Exclusive License and Sponsored Research Agreement

Effective October 24, 1997 as amended on September 1, 2001 and again on February 1, 2005, Mindset acquired from Mayo a non-exclusive license to use certain transgenic mice and related technologies as models for Alzheimer’s disease and other neurodegenerative diseases. Under the amended agreement with Mayo, Mindset is obligated to pay Mayo a royalty of 2.5% of any net revenue that Mindset receives from the sale or licensing of a drug product for Alzheimer’s disease in which the Mayo transgenic mice were used for research purposes. The Mayo transgenic mice were used by the SAMSF to conduct research with respect to OXIGON and by NYU with respect to BETA-VAX. Pursuant to the Consent to Assignment that we executed with the SAMSF in June 2005 and the license agreement with NYU for BETA-VAX, we agreed to assume all of Mindset’s obligations with respect to these licenses, which include Mindset’s obligations to pay royalties to Mayo. The license agreement with Mayo expires upon the expiration date of the last to expire patent or 10 years from the date of the agreement, whichever is later. Neither Mindset nor Intellect has received any net revenue that would trigger a payment obligation to Mayo.

PharmaSeed Transaction – Mindgenix

Effective as of July 15, 2008, Mindgenix and PharmaSeed Ltd., an Israeli company that provides drug testing services (“Pharmaseed”), entered into an Operating and Marketing Agreement under which Pharmaseed will manage MindGenix’ third party testing business, which involves the testing of compounds using APP/PS1 transgenic mice (the “Testing Business”). Pharmaseed will operate, at its expense, all aspects of the Testing Business, including invoicing and collecting client payments. MindGenix will be entitled to receive a portion of the revenue earned by Pharmaseed from the Testing Business. In addition, Pharmaseed will pay to MindGenix the portion of gross revenue due as royalty payments to USFRF and Mayo under their respective licenses, which are used to conduct the Testing Business. MindGenix would pay that money over to USFRF and Mayo. Pharmaseed has yet to make any payments to Mindgenix under this Agreement.

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The term of the agreement is three years and is renewable every year for five years, at Pharmaseed’s sole discretion. Pharmaseed may terminate the agreement with 90 days prior notice. MindGenix may terminate the agreement in the event that Pharmaseed has not used commercially reasonable efforts to maintain and develop the Testing Business. Also, the agreement may be terminated upon certain bankruptcy and insolvency events.

Pursuant to the agreement, Pharmaseed will manage all aspects of the Testing Business (facilities, personnel, etc.) at its own cost; market the Testing business at its own cost and discretion; invoice and collect payment from customers; purchase supplies and third-party services; and pay facilities utility costs for space/utilities used for the Testing Business. In addition, Pharmaseed will pay to MindGenix the amounts due to USFRF and Mayo per the terms of their respective license agreements on Testing Business revenue.

MindGenix’ retained obligations are to pay to USFRF and Mayo all amounts due per the terms of their respective license agreements on Testing Business revenue and forward Pharmaseed all documentation evidencing such payments; pay all liabilities incurred related to personnel and facilities not related to the Testing Business and all liabilities incurred prior to the effective date of the agreement; maintain responsibility for all corporate related permits, filings, tax returns and tax liabilities; maintain insurance naming Pharmaseed as an additional insured; and maintain all licenses required in order for Pharmaseed to conduct the Testing Business, including performance of all obligations towards Mayo and USFRF under the applicable license agreements.

From the revenue received from the Testing Business, Pharmaseed will pay the operating costs of the Testing Business (comprising its facilities and personnel overhead and consumables related to the Testing Business) and will pay MindGenix a quarterly fee equal to 10% of the difference between Pharmaseed’s revenues actually received directly from the Testing Business (other than revenues accepted from Intellect) less the Testing Costs. Also, Pharmaseed will pay to MindGenix, the license fees payable to USFRF and Mayo and MindGenix will pay such money over to the licensors and provide Pharmaseed with proper documentation of such payment.

Pursuant to the agreement, Pharmaseed will provide Intellect with preferred pricing and priority for testing services, equivalent to Testing Costs and license fees related to the Intellect projects plus 7% and will not pay MindGenix any fees with respect to such revenues.

We consolidate the accounts of Mindgenix because we have agreed to absorb certain costs and expenses incurred that are attributable to its research.

Research and Development Costs

We have devoted substantially all of our efforts and resources to advancing our intellectual property estate and scientific research and drug development. Generally, research and development expenditures are allocated to specific research projects. Due to various uncertainties and risks, including those described in “Risk Factors” beginning on page 19, relating to the progress of our product candidates through development stages, clinical trials, regulatory approval, commercialization and market acceptance, it is not possible to accurately predict future spending or time to completion by project or project category. Research and Development costs were $444,928 for the year ended June 30, 2009; $3,298,740 for the year ended June 30, 2008 and $5, 870, 016 for the year ended June 30, 2007. Research and Development costs from inception through June 30, 2009 were $13,271,797, which exclude patent related expenses.

Competition

Alzheimer’s disease therapies under development can largely be divided into two categories: those demonstrating a symptomatic benefit therapy; and those demonstrating a disease-modifying benefit. Although a symptomatic benefit can improve the quality of life of the patient by reducing depression, agitation and anxiety and even delay hospitalization by a few months, the effects are typically transient and do not have the disease-modifying effects that will slow the progression of Alzheimer’s disease, prolong life expectancy and possibly even cure this devastating illness. To date, the FDA has approved five drugs to treat people who have been diagnosed with Alzheimer’s disease. All are drugs that provide symptomatic benefits. None of these medications slows or arrests the progression of Alzheimer’s disease itself.

Various companies are reportedly testing active Alzheimer’s vaccines and therapeutics in clinical trials. Such companies include Elan and Wyeth, Novartis and others.

Government Regulation and Required Approvals

The process required by the FDA under the drug provisions of the United States Food, Drug and Cosmetic Act for any of our drug products to be marketed in the United States generally involves preclinical laboratory and animal tests; submission of an Investigational New Drug Application (“IND”), which must become effective before human clinical trials may begin; adequate and well-controlled human clinical trials to establish the safety and efficacy of the product candidate for its intended use; submission to the FDA of a New Drug Application (“NDA”); and FDA review and approval of a NDA. The testing and approval process requires substantial time, effort and financial resources, and we cannot be certain that any approval will be granted to us or to our licensees on a timely basis, if at all.

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Preclinical tests include laboratory evaluation of the product candidate, its chemistry, formulation and stability, as well as in-vitro and animal studies, to assess the potential safety and efficacy of the product candidate. Certain preclinical tests must be conducted in compliance with Good Manufacturing Practice (“GMP”) regulations and Good Laboratory Practice (“GLP”) guidelines. Violations of these regulations or guidelines can lead to invalidation of studies, requiring, in some cases, such studies to be replicated. In some instances, long-term preclinical studies are conducted while clinical studies are ongoing.

Results of preclinical tests, together with manufacturing information and analytical data, are submitted to the FDA as part of an IND before human clinical trials may begin. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises concerns or questions about the conduct of the trials as outlined in the IND and imposes a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before clinical trials may begin. All clinical trials must be conducted under the supervision of a qualified investigator in accordance with Good Clinical Practice (“GCP”) regulations. These regulations include the requirement that all subjects provide informed consent. Further, an independent institutional review board (“IRB”) at each medical center proposing to conduct the clinical trials must review and approve any clinical study. The IRB monitors the study and is informed of the study’s progress, particularly as to adverse events and changes in the research. Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and more frequently if serious adverse events occur.

Human clinical trials typically are conducted in three sequential phases that may overlap:

• Phase One (I): The drug is typically initially introduced into healthy human subjects or patients and tested for safety, dosage tolerance, absorption, metabolism, distribution and excretion. In some instances, the first introduction into humans will be to patients rather than healthy subject, such as in some drugs developed for various cancer indications.

• Phase Two (II): The drug is studied in a limited patient population to identify possible adverse effects and safety risks, to obtain initial information regarding the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.

• Phase Three (III): Generally large trials undertaken to further evaluate dosage and clinical efficacy and safety in an expanded patient population, often at geographically dispersed clinical study sites.

With the exception of OXIGON, which has successfully completed Phase I, we cannot be certain that we will successfully complete Phase I, Phase II or Phase III testing of our product candidates within any specific time period, if at all.

Concurrent with clinical trials and preclinical studies, information about the chemistry and physical characteristics of the drug product must be developed and a process for its manufacture in accordance with GMP requirements must be finalized. The manufacturing process must be capable of consistently producing quality batches of the product, and we must develop methods for testing the quality, purity and potency of initial, intermediate and final products. Additionally, appropriate packaging must be selected and tested and chemistry stability studies must be conducted to demonstrate that the product does not undergo unacceptable deterioration over its shelf life.

The results of product development, preclinical studies and clinical studies are submitted to the FDA as part of a NDA for approval of the marketing and commercial shipment of the product. The FDA reviews each NDA submitted and may request additional information, rather than accepting the NDA for filing. In this event, the application must be resubmitted with the additional information. The resubmitted application is subject to review before the FDA accepts it for filing. Once the FDA accepts the NDA for filing, the agency begins an in-depth review of the NDA. The FDA has substantial discretion in the approval process and may disagree with interpretations of the data submitted in the NDA. The review process may be significantly extended should the FDA request additional information or clarification regarding information already provided. Also, as part of this review, the FDA may refer the application to an appropriate advisory committee, typically a panel of clinicians, for review, evaluation and a recommendation. The FDA is not bound by the recommendation of an advisory committee. Manufacturing establishments often are subject to inspections prior to NDA approval to assure compliance with GMP standards and with manufacturing commitments made in the relevant marketing application.

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Satisfaction of FDA requirements or requirements of state, local and foreign regulatory agencies typically takes several years and the actual time required may vary substantially based upon the type, complexity and novelty of the pharmaceutical product. Government regulation may delay or prevent marketing of potential products for a considerable period of time and impose costly procedures upon our activities. We cannot be certain that the FDA or any other regulatory agency will grant approval for any of our product candidates on a timely basis, if at all. Success in preclinical or early-stage clinical trials does not assure success in later-stage clinical trials. Data obtained from preclinical and clinical activities are not always conclusive and may be susceptible to varying interpretations that could delay, limit or prevent regulatory approval. Even if a product receives regulatory approval, the approval may be significantly limited to specific indications or uses. Further, even after regulatory approval is obtained, later discovery of previously unknown problems with a product may result in restrictions on the product or even complete withdrawal of the product from the market. Delays in obtaining, or failures to obtain regulatory approvals would have a material adverse effect on our business.

Any products manufactured or distributed by us pursuant to the FDA clearances or approvals would be subject to pervasive and continuing regulation by the FDA, including record-keeping requirements, reporting of adverse experiences with the drug, submitting other periodic reports, drug sampling and distribution requirements, notifying the FDA and gaining its approval of certain manufacturing or labeling changes, complying with certain electronic records and signature requirements, and complying with the FDA promotion and advertising requirements. Drug manufacturers and their subcontractors are required to register their facilities with the FDA and state agencies and are subject to periodic unannounced inspections by the FDA and state agencies for compliance with GMP standards, which impose procedural and documentation requirements upon us and our third-party manufacturers. Failure to comply with these regulations could result, among other things, in suspension of regulatory approval, recalls, suspension of production or injunctions, seizures, or civil or criminal sanctions.

The FDA regulates drug labeling and promotion activities. The FDA has actively enforced regulations prohibiting the marketing of products for unapproved uses. Under the FDA Modernization Act of 1997, the FDA occasionally will permit the promotion of a drug for an unapproved use in certain circumstances, but subject to very stringent requirements. OXIGON may be prescribed for uses unintended in its initial approval because it may prove to be effective in treating other indications caused by oxidative stress. However, due to the FDA Modernization Act of 1997, we would be prohibited from labeling OXIGON for such other indications, which may limit the marketability of the product.

We would be subject to a variety of state laws and regulations in those states or localities where our product candidates and any other products we may in-license would be marketed. Any applicable state or local regulations may hinder our ability to market our product candidates and any other products we may in-license in those states or localities. In addition, whether or not FDA approval has been obtained, approval of a pharmaceutical product by comparable governmental regulatory authorities in foreign countries must be obtained prior to the commencement of clinical trials and subsequent sales and marketing efforts in those countries. The approval procedure varies in complexity from country to country and the time required may be longer or shorter than that required for FDA approval. We may incur significant costs to comply with these laws and regulations now or in the future.

The FDA’s policies may change and additional government regulations may be enacted that could prevent or delay regulatory approval of our potential products. Moreover, increased attention to the containment of health care costs in the United States and in foreign markets could result in new government regulations that could have a material adverse effect on our business. We cannot predict the likelihood, nature or extent of adverse governmental regulation that might arise from future legislative or administrative action, either in the United States or abroad.

We are subject to a variety of other local, state, federal and foreign regulatory regimes, and may become subject to additional regulations if any of our product candidates enter the production cycle, that may require us to incur significant costs to comply with such regulations now or in the future.  We cannot assure you that any portion of the regulatory framework under which we currently operate will remain consistent and that any change or new regulations will not have a material adverse effect on our current and anticipated operations.

Employees

As of June 30, 2009, we have three employees, our chief executive officer, our President and Chief Financial Officer and an administrative assistant.  All of our employees are located in New York City. Dr. Chain, our CEO, and Mr. Maza, our President and CFO, have signed employment agreements with us.  We believe our relations with our employees are good.

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Outsourcing

We expect to outsource most of our development and manufacturing work. We engage experienced drug development consultants to provide advice on development issues. Overseeing our scientific and clinical strategy are two boards of academic and clinical advisors comprised of experts in the field of Alzheimer’s disease research and related disorders. We believe that this outsourcing strategy is the optimal method for developing our drug candidates given our current and anticipated financial resources.

Marketing

We do not have an organization for the sales, marketing and distribution of our product candidates. Our core business strategy is to leverage our intellectual property estate through license or other arrangements and to enter into collaboration agreements with major pharmaceutical companies to develop our proprietary compounds. We expect future partners to complete product development, seek regulatory approvals and commercialize the resulting drug products. We do not intend to market any products and do not anticipate a need for any sales, marketing or distribution capabilities.

Insurance Coverage

We have General Liability Insurance and Workers Compensation and Disability policies and Director & Officer Insurance.

Corporate Information

We are located at 7 West 18th Street, 9th Floor, New York, New York, 10011 and our corporate telephone number is (212) 448-9300. Additional information can be found on our website; www.intellectns.com. Our Internet website and the information contained therein or connected thereto are not a part or incorporated into this Annual Report on Form 10-K.

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Item 1A. RISK FACTORS

Risk Factors

You should carefully read the following risk factors when you evaluate our business and the forward-looking statements that we make in this report, in our financial statements and elsewhere. Any of the following risks could materially adversely affect our business, our operating results, our financial condition and the actual outcome of matters as to which we make forward-looking statements.

Risks related to our lack of liquidity

We have minimal cash on hand and may be forced to cease operations.

As of June 30, 2009, we had cash and cash equivalents of approximately $271,000. We anticipate that our existing capital resources will not enable us to continue operations beyond mid-October 2009, or earlier if unforeseen events or circumstances arise that negatively affect our liquidity. If we fail to raise additional capital or obtain substantial cash inflows from potential partners by mid-October 2009, we will be forced to cease operations. We are in discussions with several potential investors concerning financing options. We cannot assure you that financing will be available in a timely manner, on favorable terms or at all.

We have limited capital resources and operations to date have been funded with the proceeds from equity and debt financings and proceeds from license agreements. The audit report prepared by our independent registered public accounting firm relating to our consolidated financial statements for the period ended June 30, 2009 includes an explanatory paragraph expressing the substantial doubt about our ability to continue as a going concern.

Even if we obtain additional financing, our business will require substantial additional investment that we have not yet secured. We cannot be sure how much we will need to spend in order to develop new products and technologies in the future. Further, we will not have sufficient resources to develop fully any new products or technologies unless we are able to raise substantial additional financing on acceptable terms or secure funds from new or existing partners. Our failure to raise capital when needed would adversely affect our business, financial condition and results of operations, and could force us to reduce or discontinue our operations at some time in the future, even if we obtain financing in the near term.

We have no revenues and have incurred and expect to continue to incur substantial losses. We may never earn product revenues or achieve and maintain profitability.

Through June 30, 2009, we have not generated any revenues other than up-front fees and milestone payments from license agreements. As a result, we have generated significant operating losses since our formation and expect to incur substantial losses and negative operating cash flows for the foreseeable future.

As of June 30, 2009, we had a capital deficit of approximately $19.7 million and a deficit accumulated during the development stage of our Company of approximately $42.2 million. Our net income from operations for the fiscal year ended June 30, 2009 was approximately $0.3 million and net cash used by operations was approximately $0.7 million. Our failure to achieve or maintain significant profitability has and will continue to have an adverse effect our stockholder’s equity, total assets and working capital and could negatively impact the value of our common stock.

Unless and until our product candidates or product candidates subject to license agreements with our licensees receive approval from the FDA and from regulatory authorities in foreign jurisdictions, we will not generate any revenues from product sales. Even if we succeed in licensing our technology to generate income, we still will be operating at a significant loss during the course of our drug development programs. We expect to continue to incur significant operating expenditures for at least the next several years and anticipate that our expenses will increase substantially in the foreseeable future. As a result, we may not be able to achieve or maintain profitability in the future.

We are in default under certain of our Convertible Notes.

As of June 30, 2009 and continuing through the date of this report, we are in default on convertible promissory notes with an aggregate carrying value of $5.3 million. On October 21, 2008, one of our note holders filed a complaint in the United States District Court of the Southern District of New York claiming that approximately $541,000 of principal and accrued interest was past due and that he was entitled to a money judgment against us for all amounts due under the note, plus attorney’s fees, costs and disbursements.  The matter was settled on April 22, 2009 and the note holder released our company from all of the claims set forth above.  In connection with the settlement, Margie Chassman, one of our principal stockholders, purchased the note from the note holder and agreed to cancel it.

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Risks related to our business

We are in the early stages of product development and we may never successfully develop and commercialize any products.

We are a development stage biopharmaceutical company and are in the early stages of developing our products. We have not yet successfully developed any of our product candidates. We may fail to develop any products, to implement our business model and strategy successfully or to revise our business model and strategy should industry conditions and competition change. Even if we successfully develop one or more of our product candidates, the products may not generate sufficient revenues to enable us to be profitable. Furthermore, we cannot make any assurances that we will be successful in addressing these risks. If we are not, our business, results of operations and financial condition will be materially adversely affected.

We plan to develop our products by collaborating with third-parties and we face substantial competition in this endeavor. If we are not successful in establishing such third party collaboration arrangements, we may not be able to successfully develop and commercialize our products.

Our business strategy includes finding larger pharmaceutical companies with which to collaborate to support the research, development and commercialization of our product candidates. In trying to attract corporate partners to collaborate with us in the research, development and commercialization process, we face serious competition from other small biopharmaceutical companies. If we are unable to enter into such collaboration arrangements, our ability to proceed with the research, development, manufacture or sale of product candidates may be severely limited. Even if we do enter into such collaborations, our partners may not succeed in developing or commercializing product candidates.

We have a limited operating history and we may not be able to successfully develop our business.

We were incorporated in Delaware in April 2005 and began operations in June 2005 when we acquired assets from Mindset Biopharmaceuticals (USA), Inc. (“Mindset”). Our limited operating history makes predicting our future operating results difficult. As a biopharmaceutical company with a limited history, we face numerous risks and uncertainties in the competitive market for Alzheimer’s disease and central nervous system related drugs. In particular, we have not proven that we can develop drugs in a manner that enables us to be profitable and meet regulatory, strategic partner and customer requirements; develop and maintain relationships with key vendors and strategic partners that will be necessary to enhance the market value of our product candidates; raise sufficient capital in the public and/or private markets; or respond effectively to competitive pressures.

If we are unable to accomplish these goals, our business is unlikely to succeed. Even if we are able to license our technology to generate income we still will be operating at a significant loss during the course of our drug development programs.

OXIGON is our only product candidate in clinical trials and if we are unable to proceed with clinical trials for our other product candidates or if the future trials are unsuccessful or significantly delayed we may not be able to develop and commercialize our products.

None of our product candidates has reached clinical trial stages in the United States. On December 1, 2005, we began Phase I clinical trials for OXIGON in the Netherlands. These trials were completed on November 15, 2006. We intend to submit an Investigational New Drug Application to the FDA for OXIGON and begin Phase II trials in the United States shortly after obtaining sufficient financial resources to support such activities. Additionally, we anticipate starting Phase I trials for IN-N01, our monoclonal therapeutic antibody, when we obtain sufficient financial resources to support such trials. Successful development and commercialization of our product candidates are dependent on, among other factors, the successful outcome of future studies needed to make a final selection of drug candidates; successful manufacture and formulation of drug products; additional preclinical studies to establish efficacy and safety across species; successful outcome of future clinical trials that establish both safety and efficacy; receipt of regulatory approval for our product candidates; raising substantial additional financing; and establishing any strategic partnerships that would result in a license of our technology. There can be no assurance that we or any future partners will successfully develop and commercialize our product candidates.

If we or future partners fail to obtain or maintain the necessary United States or worldwide regulatory approvals for our product candidates or those subject to license agreements with us, such products will not be commercialized.

The success of our business depends on our or any future partner’s ability to put product candidates through rigorous, time-consuming and costly clinical testing, and to obtain regulatory approval for those products. Government regulations in the United States and other countries significantly impact the research and development, manufacture and marketing of drug product candidates. We or any of our future partners will require FDA approval to commercialize product candidates in the United States and approvals from similar regulatory authorities in foreign jurisdictions to commercialize our product candidates, or those subject to license agreements with us, in those jurisdictions.

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The FDA and other regulatory authorities have substantial discretion in the drug approval process and may either refuse to accept an application for any product candidates or may decide after review of the application(s) that the data is insufficient to allow approval of the relevant product(s). If the FDA or other regulatory authorities do not accept or approve the application(s), they may require us or our partners to conduct additional preclinical testing, clinical trials or manufacturing studies and submit those data before they will reconsider the application or require us or our partners to perform post-marketing studies even after a product candidate is approved for commercialization. Even if we or our partners comply with all FDA and other regulatory requests, the FDA may ultimately reject the product candidates or the New Drug Applications. We cannot be certain that we or any of our future partners will ever obtain regulatory clearance of any of our product candidates or those subject to license agreements with us. Failure to obtain FDA approval will severely undermine our business by reducing our potential number of salable products and, therefore, corresponding product revenues. Also, the FDA might approve one or more of our or our future partner’s product candidates, but also might approve competitors’ products possessing characteristics that offer their own treatment, cost or other advantages.

In addition, even if our current product candidates and any additional product candidates we pursue in the future are marketed, the products and our manufacturers are subject to continual review by the FDA and other applicable regulatory authorities. At any stage of development or commercialization, the discovery of previously unknown problems with our product candidates, our manufacturing or the manufacturing by third-party manufacturers may result in restrictions on our product candidates and any other products we may in-license, including withdrawal of the product from the market. Foreign regulatory approval processes generally include all of the risks associated with the FDA approval procedures described above.

If we are not able to maintain our current license rights or obtain additional licenses, our business will suffer.

We use technologies that we do not own in the development and configuration of our product candidates. There can be no assurance that any of the current contractual arrangements between us and third parties or between our strategic partners and other third parties, will be continued or not breached or terminated early. In the future, we may also require technologies to which we do not currently have any rights. We may not be able to obtain these technologies on acceptable terms if at all. Any such additional licenses may require us to pay royalties or other fees to third parties, which would have an adverse effect on our potential revenues and gross margin.

If we fail to make payments under or otherwise breach our key license agreements, they could be terminated and we would lose our rights to such technologies. This loss of rights could materially adversely affect our ability to develop and commercialize our product candidates and our ability to generate revenues.

Our license agreements related to OXIGON with each of New York University and South Alabama Medical Science Foundation require us to pay royalties and other fees and also to make payments when certain milestones are reached. In addition, our license agreements with each of New York University and South Alabama Medical Science Foundation require us to take steps to commercialize the licensed technology in a timely manner. We have not as of yet generated any revenues or successfully developed or commercialized any of our products. If we are not able to generate revenues or develop and commercialize our products in the future we may be in breach of our key licensing agreements and our licensing parties may terminate the agreements. If a licensor terminates an agreement, we could lose our right to commercially exploit the intellectual property underlying OXIGON or certain of our immunotherapy programs, which would adversely affect our ability to develop commercial products.

Our operating results may significantly fluctuate from quarter-to-quarter and year-to-year.

Through the date of this report, we have generated minimal revenues. If and when we do, we expect that a significant portion of our revenues for the foreseeable future will be comprised of license fees, royalties and milestone payments. The timing of revenue in the future will depend largely upon the signing of collaborative research and development or technology licensing agreements or the licensing of our product candidates for further development and payment of fees, milestone payments and royalties. In any one fiscal quarter we may receive multiple or no payments from our collaborators. As a result, operating results may vary substantially from quarter-to-quarter and, thus, from year-to-year. Revenue for any given period may be greater or less than revenue in the immediately preceding period or in the comparable period of the prior year.  Therefore, investors should not rely on our revenue or other operating results from one or more quarters as being indicative of our revenue or other operating results for any future period.

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We have no research facilities. If we are not successful in developing our own research facilities or entering into research agreements with third party providers, our development efforts and clinical trials may be delayed.

Currently, we have no scientific research laboratory. We have shut down our Israeli research laboratory and sold the majority of the equipment due to lack of sufficient funds to support the research operation. We have dismissed all remaining employees in Israel.  In order to resume our research efforts, we must recruit additional scientists and rebuild or utilize third party laboratory facilities. We cannot be sure that we will raise sufficient funds to do any of the above. Failure to accomplish these tasks would impede our efforts to develop our existing product candidates and conduct research to identify future product candidates, which would adversely affect our ability to generate revenue.

We have no manufacturing capabilities. If we are not successful in developing our own manufacturing capabilities or entering into third party manufacturing agreements or if third-party manufacturers fail to devote sufficient time and resources to our concerns, our clinical trials may be delayed.

Currently, we have no internal manufacturing capabilities for any of our product candidates. Our clinical batch supplies are manufactured by a third party manufacturer based in Switzerland and other countries. We have sufficient drug product to perform the necessary non-clinical studies in support of Phase II and have the necessary “know-how” to manufacture OXIGON. In order to continue the clinical development process for OXIGON and our other product candidates, however, we must continue to rely on third parties to manufacture these product candidates. There can be no assurance that any of the current contractual arrangements between us and third party manufacturers will be continued or not breached or terminated early. There can be no assurance that we can identify and enter into contracts with replacement manufacturers if our current manufacturing arrangements are terminated. In addition, reliance on third party manufacturers could expose us to other risks, such as substandard performance, difficulties in achieving volume production and poor quality control or noncompliance with FDA and other regulatory requirements. If we decide to manufacture one or more product candidates ourselves, we would incur substantial start-up expenses and need to acquire or build facilities and hire additional personnel.

Our product candidates are subject to the risk of failure inherent in the development of products based on new and unproved technologies.

Because our product candidates and those of any future partner, which are the subject of license agreements with us, are and will be based on new and unproven technologies, they are subject to risk of failure. These risks include the possibility that our new approaches will not result in any products that gain market acceptance; a product candidate will prove to be unsafe or ineffective, or will otherwise fail to receive and maintain regulatory clearances necessary for marketing; a product, even if found to be safe and effective, could still be difficult to manufacture on the large scale necessary for commercialization or otherwise not be economical to market; a product could unfavorably interact with other types of commonly used medications, thus restricting the circumstances in which it may be used; proprietary rights of third parties will preclude us from manufacturing or marketing a new product; or third parties could market superior or more cost-effective products. As a result, our activities, either directly or through corporate partners, may not result in any commercially viable products.

In order to achieve successful sales of our product candidates or those developed by any of our future partners, the product candidates need to be accepted in the healthcare market by healthcare providers, patients and insurers. Lack of such acceptance will have a negative impact on any future sales.

Our future success is dependent upon the acceptance of our product candidates by health care providers, patients and health insurance companies, Medicare and Medicaid. Such market acceptance, if it were to occur, would depend on numerous factors, many of which are not under our control including regulatory approval; product labeling; safety and efficacy of our products; availability, safety, efficacy and ease of use of alternative products and treatments; the price of our drugs relative to the price of alternative products and treatments; and achieving reimbursement approvals from Medicare, Medicaid and private insurance providers.

We cannot guarantee that any of our product candidates or those developed by any of our future partners, which are subject to license agreements with us, would achieve market acceptance. Additionally, we cannot guarantee that third-party payors, hospitals or health care administrators would accept any of the products we manufacture or in-license on a large-scale basis. We also cannot guarantee that we would be able to obtain approvals for indications and labeling for our products that will facilitate their market acceptance. Furthermore, unanticipated side-effects, patient discomfort, defects or unfavorable publicity of our drugs or other therapies based on a similar technology, could have a significant adverse effect on our effort to commercialize our lead or any subsequent drug candidates.

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Our ability to generate product revenues will be diminished if our drugs sell for inadequate prices or patients are unable to obtain adequate levels of reimbursement.

Our collaborator’s ability to commercialize our drugs will depend in part on the extent to which reimbursement will be available from government and health administration authorities, private health maintenance organizations and health insurers, and other health care payors. Significant uncertainty exists as to the reimbursement status of newly approved health care products. Health care payors, including Medicare, routinely challenge the prices charged for medical products and services. Government and other health care payors increasingly attempt to contain health care costs by limiting both coverage and the level of reimbursement for drugs, which may limit our commercial opportunity. Even if our product candidates are approved by the FDA, insurance coverage may not be available and reimbursement levels may be inadequate to cover our drugs. Proposals currently being considered by to reform the U.S. health insurance system create additional uncertainty and risk that any drugs that we or our collaborators seek to commercialize may not receive adequate coverage or reimbursement.  If government and other health care payors do not provide adequate coverage and reimbursement levels for our product candidates, the post-approval market acceptance of our products could be diminished.

Our product candidates may be subject to future product liability claims. Such product liability claims could result in expensive and time-consuming litigation and payment of substantial damages.

The testing, production, marketing, sale and use of products using our technology is unproven as of yet and there is risk that product liability claims may be asserted against us if it is believed that the use or testing of our product candidates have caused adverse side effects or other injuries. In addition, providing diagnostic testing and therapeutics entails an inherent risk of professional malpractice and other claims. Claims, suits or complaints relating to the use of products utilizing our technology may be asserted against us in the future by patients participating in clinical trials of our product candidates or following commercialization of products. If a product liability claim asserted against was successful, we also could also be required to limit commercialization of our product candidates or completely withdraw a product from the market. Regardless of merit or outcome, claims against us would likely result in significant diversion of our management’s time and attention, expenditure of large amounts of cash on legal fees, expenses and damages and a decreased demand for our products and services. We currently do not have any insurance coverage to protect us against product liability claims during clinical trials of product candidates and we may not be able to acquire or maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us during clinical trials of any product candidates or following commercialization of any products

Our future collaborators may compete with us or have interests which conflict with ours. This may restrict our research and development efforts and limit the areas of research in which we intend to expand.

Large pharmaceutical companies that we seek to collaborate with may have internal programs or enter into collaborations with our competitors for products addressing the same medical conditions targeted by our technologies. Thus, our collaborators may pursue alternative technologies or product candidates in order to develop treatments for the diseases or disorders targeted by our collaborative arrangements. Our collaborators may pursue these alternatives either on their own or in collaboration with others, including our competitors. Depending on how other product candidates advance, a corporate partner may slow down or abandon its work on our product candidates or terminate its collaborative arrangement with us in order to focus on these other prospects.

If any conflicts arise, our future collaborators may act in their own interests, which may be adverse to ours. In addition, in our future collaborations, we may be required to agree not to conduct any research that is competitive with the research conducted under our future collaborations. Our future collaborations may have the effect of limiting the areas of research that we may pursue. Our collaborators may be able to develop products in related fields that are competitive with the products or potential products that are the subject of these collaborations.

We do not have control of our outside scientific and clinical advisors. They may pursue objectives which are contrary to our interest, which could impede our research and development efforts.

We work with scientific and clinical advisors at academic and other institutions who are experts in the field of Alzheimer’s disease and other central nervous system disorders and diseases caused by oxidative stress. Our advisors assist us in our research and development efforts and advise us with respect to our clinical trials for OXIGON and our planned clinical trials for our other product candidates. However, our advisors are not our employees and they may have other commitments that would limit their future availability to us. Accordingly, we may lose their services, which may delay the clinical development of our drug candidates and impair our reputation in the industry.

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If we fail to obtain, apply for, adequately prosecute to issuance, maintain, protect or enforce patents for our inventions and products, the value of our intellectual property rights and our ability to license, make, use or sell our products would materially diminish or could be eliminated entirely.

Our success, competitive position and future revenues will depend in part on our ability to obtain and maintain patent protection for our inventions and product candidates and for methods, processes and other technologies, as well as our ability to preserve our trade secrets, prevent third parties from infringing on our proprietary rights or invalidating our patents and operate without infringing the proprietary rights of third parties.

Our patent position is uncertain and involves complex legal and factual questions for which important legal principles are changing and/or unresolved. Because we rely heavily on patent protection and others have sought patent protection for technologies similar to ours, the risks are particularly significant and include the following:

· The patent offices may not grant claims of our pending applications or future applications and may not grant patents having claims of meaningful scope to protect adequately our technologies, processes and products.

· We may not be able to obtain patent rights to compositions, products, treatment methods or manufacturing processes that we may develop or license from third parties.

· Even if our patents are granted, our freedom to operate and to develop products may be restricted or blocked by patents of our competitors.

· Some of the issued patents we now license or any patents which are issued to us in the future may be determined to be invalid and/or unenforceable, or may offer inadequate protection against competitive products.

· If we have to defend the validity of the patents that we have in-licensed or any future patents or protect against third party infringements, the costs of such defense are likely to be substantial and we may not achieve a successful outcome.

· In the event any of the patents we have in-licensed are found to be invalid or unenforceable, we may lose our competitive position and may not be able to receive royalties for products covered in part or whole by that patent under license agreements. Further, competitors may be free to offer copies of our products if such patents are found to be invalid or unenforceable.

· Others may obtain patents claiming aspects similar to those covered by our patents and patent applications, which could enable them to make and sell products similar to ours.

· We may be estopped from claiming that one or more of our patents is infringed due to amendments to the claims and/or specification, or as a result of arguments that were made during prosecution of such patents in the United States Patent and Trademark Office, or by virtue of certain language in the patent application. The estoppel may result in claim limitation and/or surrender of certain subject matter to the public domain or the ability of competitors to design around our claims and/or avoid infringement of our patents. If our patents or those patents for which we have license rights become involved in litigation, a court could revoke the patents or limit the scope of coverage to which they are entitled.

· Several bills affecting patent rights have been introduced in the United States Congress, and significant rule changes are being considered by the Patent and Trademark Office. These bills and rule changes address various aspects of patent law and practice, including, conversion from a first-to-invent to a first-to-file standard and the concomitant implementation of procedures for opposing a granted patent and changes in (i) the permitted number of continuation applications, (ii) the timing for filing divisional applications, (iii) the rules for providing the Patent and Trademark Office with information material to the patentability of an invention, (iv) the scope of subject matter that may be claimed in a single application, (v) the number of claims permitted in an application, and (vi) the method of calculating damages for patent infringement. It is not certain whether any of these bills will be enacted into law, what form new laws and regulations may take, or what the result of Patent and Trademark Office rule changes will be. Accordingly, the effect of these changes on our intellectual property estate is uncertain.

If we fail to obtain and maintain adequate patent protection and trade secret protection for our drug candidates, proprietary technologies and their uses, we could lose any competitive advantage and the competition we face could increase, thereby reducing our potential revenues and adversely affecting our ability to attain or maintain profitability.

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A dispute concerning the infringement or misappropriation of our proprietary rights or the proprietary rights of others could be time consuming and costly and an unfavorable outcome could harm our business.

There is significant litigation in the biotechnology field regarding patents and other intellectual property rights. Biotechnology companies of roughly our size and financial position have gone out of business from the cost of patent litigation and from losing a patent litigation. We may be exposed to future litigation by third parties based on claims that our drug candidates, technologies or activities infringe the intellectual property rights of others. Although we try to avoid infringement, there is the risk that we will use a patented technology owned or licensed by another person or entity and/or be sued for infringement of a patent owned by a third party. Under current United States law, patent applications are confidential for 18 months following their priority filing date and may remain confidential beyond 18 months if no foreign counterparts are applied for in jurisdictions that publish patent applications. There are many patents relating to specific genes, nucleic acids, polypeptides or the uses thereof to treat Alzheimer’s disease and other central nervous system diseases. In some instances, a patentee could prevent us from using patented genes or polypeptides for the identification or development of drug compounds. If our products or methods are found to infringe any patents, we may have to pay significant damages and royalties to the patent holder or be prevented from making, using, selling, offering for sale or importing such products or from practicing methods that employ such products.

In addition, we may need to resort to litigation to enforce a patent issued or licensed to us, protect our trade secrets or determine the scope and validity of third-party proprietary rights. Such litigation could be expensive and there is no assurance that we would be successful. From time to time, we may hire scientific personnel formerly employed by other companies involved in one or more fields similar to the fields in which we are working. Either these individuals or we may be subject to allegations of trade secret misappropriation or similar claims as a result of their prior affiliations. If we become involved in litigation, it could consume a substantial portion of our managerial and financial resources, regardless of whether we win or lose. As a result, we could be prevented from commercializing current or future products or methods.

Confidentiality agreements with employees and others may not adequately prevent disclosure of our trade secrets and other proprietary information and may not adequately protect our intellectual property.

Our success also depends upon the skills, knowledge and experience of our scientific and technical personnel, our consultants and advisors as well as our partners, collaborators, licensors and contractors. Because we operate in a highly competitive technical field of drug discovery, we rely in part on trade secrets to protect our proprietary technology and processes. However, trade secrets are difficult to protect. We enter into confidentiality and intellectual property assignment agreements with our corporate partners, employees, consultants, outside scientific collaborators, sponsored researchers and other advisors. These agreements generally require that the receiving party keep confidential and not disclose to third parties all confidential information developed by the receiving party or made known to the receiving party by us during the course of the receiving party’s relationship with us. These agreements also generally provide that inventions conceived by the receiving party in the course of rendering services to us will be our exclusive property. However, these agreements may be breached and may not effectively assign intellectual property rights to us. Our trade secrets also could be independently discovered by competitors, in which case we would not be able to prevent use of such trade secrets by our competitors. The enforcement of a claim alleging that a party illegally obtained and was using our trade secrets could be difficult, expensive and time consuming and the outcome would be unpredictable. In addition, courts outside the United States may be less willing to protect trade secrets. The failure to obtain or maintain meaningful trade secret protection could adversely affect our competitive position.

Certain of our product development programs depend on our ability to maintain rights under our licensed intellectual property. If we are unable to maintain such rights, our research and development efforts will be impeded and our business and financial condition will be negatively impacted.

We have licensed intellectual property, including patents, patent applications and know-how, from universities and others, including intellectual property underlying our OXIGON product development program. Some of our product development programs depend on our ability to maintain rights under these licenses. Under the terms of such license agreements, we are generally obligated to, among other things, exercise commercially reasonable efforts in the development and marketing of these technologies; make specified royalty and milestone payments to the party from which we have licensed the technology; reimburse patent costs to the licensors; enforce the underlying intellectual property against unauthorized third parties; and pay development milestones, for example, on the commencement of clinical trials and filing of a New Drug Application and pay a royalty on product sales.

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Each licensor has the power to terminate its agreement if we fail to meet our obligations under that license. We may not be able to meet our obligations under these license agreements. Furthermore, these obligations may conflict with our obligations under other agreements. If we default under any of these license agreements, we may lose our right to market and sell any products based on the licensed technology. Losing marketing and sales rights would have a material negative effect on our business, financial condition and results of operations.

The United States government holds rights that may permit it to license to third parties technology that we currently hold the exclusive right to use. We may lose our rights to such licenses if the government chooses to exercise its rights.

The United States government holds rights in inventions that were conceived or reduced to practice under a government-funded program. This applies to aspects of our OXIGON technology, which has been licensed to us by third-party licensors who have received government funding. These government rights include a non-exclusive, royalty-free, worldwide license for the government to practice the invention or to have the invention practiced by a third party for any governmental purpose. In addition, the United States government has the right to grant licenses to others under any of these inventions if the government determines that adequate steps have not been taken to commercialize such inventions; the grant is necessary to meet public health or safety needs; or the grant is necessary to meet requirements for public use under federal regulations.

The United States government also has the right to take title to a subject invention made with government funding if we fail to disclose the invention within specified time limits. The United States government may acquire title in any country in which we do not file a patent application for inventions made with government funding within specified time limits. We may lose our right to the licensed technologies if we fail to meet the obligations required by the government, or if the government decides to exercise its rights

We may be subject to litigation related to our acquisition of assets from Mindset.

On June 23, 2005, Intellect acquired certain intellectual property from Mindset Biopharmaceuticals (USA), Inc.  (“Mindset”).  All of the significant creditors and all but one of the shareholder groups of Mindset consented to the transaction.  That shareholder group was comprised of several entities associated with MPM Capital LLC.  During or about mid-2008, MPM Capital LLC and its affiliates (collectively “MPM”) and Intellect agreed to toll claims which MPM might wish to assert arising out of or in connection with the acquisition transaction until December 2008. The parties subsequently extended the tolling agreement until June 2009.  The tolling agreement expired at the end of June 2009 without the initiation by MPM of any action or arbitration against Intellect. Although Intellect does not believe that MPM has any valid and timely claims against Intellect, there can be no assurance that MPM will not assert claims against Intellect in the future.  Any such claims could be costly and time consuming for Intellect to defend, regardless of their validity or merit.

Risks related to our industry

Our technology may become obsolete or lose its competitive advantage.

The pharmaceuticals business is very competitive, fast moving and intense, and we expect it to be increasingly so in the future. Other companies have developed and are developing Alzheimer’s disease drugs that, if not similar in type to our drugs, are designed to address the same patient or subject population. Therefore, there is no assurance that our product candidates or those being developed by our collaborators or licensees will be the best, the safest, the first to market, or the most economical to make or use. If competitors’ products are superior to ours or our collaborators’ or licensees’ products, for whatever reason, our products may become obsolete. In particular, our competitors could develop and market Alzheimer’s disease therapeutic products that are more effective, have fewer side-effects or are less expensive than our current or future product candidates. Such products, if successfully developed, could render our technologies or product candidates obsolete or non-competitive.

Clinical trials are expensive, time-consuming and difficult to design and implement.

Human clinical trials are expensive and difficult to design and implement, in part because they are subject to rigorous regulatory requirements. Further, the medical, regulatory and commercial environment for pharmaceutical products changes quickly and often in ways that we may not be able to accurately predict. The clinical trial process also is time-consuming and we do not know whether planned clinical trials will begin on time or whether we will complete any of our clinical trials on schedule or at all. We estimate that clinical trials of our product candidates will take at least several more years to complete. Significant delays may adversely affect our financial results and the commercial prospects for our product candidates and any other products we may in-license and delay or impair our ability to become profitable. Product development costs to our potential collaborators and us will increase if we have delays in testing or approvals or if we need to perform more or larger clinical trials than planned. Furthermore, as failure can occur at any stage of the trials, we could encounter problems that cause us to abandon or repeat clinical trials. The commencement and completion of clinical trials may be delayed by several factors, including changes to applicable regulatory requirements; unforeseen safety issues; determination of dosing issues; lack of effectiveness in the clinical trials; lack of sufficient patient enrollment; slower than expected rates of patient recruitment; inability to monitor patients adequately during or after treatment; inability or unwillingness of medical investigators to follow our clinical protocols; inability to maintain a supply of the investigational drug in sufficient quantities to support the trials; and suspension or termination of clinical trials for various reasons, including noncompliance with regulatory requirements or changes in the clinical care protocols and standards of care within the institutions in which our trials take place.

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In addition, we, or the FDA or other regulatory authorities, may suspend our clinical trials at any time if it appears that participants are being exposed to unacceptable health risks or if the FDA finds deficiencies in our Investigational New Drug Application submissions or the conduct of our trials. We may be unable to develop marketable products. In addition, the competition for clinical institutions that act as investigators in clinical trials is intense. There can be no assurance that we will be able to conclude appropriate contracts with such institutions. Even if we are successful, slow recruitment of patients could cause significant delay in our development plans.

Problems during our clinical trial procedures could have serious negative impacts on our business.

FDA approval requires significant research and animal tests, which are referred to as preclinical studies, as well as human tests, which are referred to as clinical trials. Similar procedures are required in foreign countries. If we experience unexpected, inconsistent or disappointing results in connection with a clinical trial, our business will suffer.

If any of the following events arise during our clinical trials or data review, we expect it would have a serious negative effect on our results of operations and ability to commercialize a product candidate and could subject us to significant liabilities:

· Any of our product candidates may be found to be ineffective or to cause harmful side-effects, including death;

· Our clinical trials for any of product candidates may take longer than anticipated, for any of a number of reasons, including a scarcity of subjects that meet the physiological or pathological criteria for entry into the study, a scarcity of subjects that are willing to participate in the trial, or data and document review;

· The reported clinical data for any of our product candidates may change over time as a result of the continuing evaluation of patients or the current assembly and review of existing clinical and preclinical information;

· Data from various sites participating in the clinical trials for each of our product candidates may be incomplete or unreliable, which could result in the need to repeat the trial or abandon the project; and

· The FDA and other regulatory authorities may interpret our data differently than we do which may delay or deny approval.

The results of our clinical trials may not support our product candidate claims.

Even if our clinical trials are completed as planned, we cannot be certain that their results will support our product candidate claims or that the FDA or government authorities in other countries will agree with our conclusions regarding such results. Success in preclinical testing and early clinical trials does not ensure that later clinical trials will be successful and the results of later clinical trials often do not replicate the results of prior clinical trials and preclinical testing. In addition, our clinical trials involve a small patient population. Because of the small sample size, the results of these clinical trials may not be indicative of future results in a larger and more diverse patient population. The clinical trial process may fail to demonstrate that our product candidates are safe for humans and effective for indicated uses. This failure could cause us to abandon a product candidate and may delay development of other product candidates. Any delay in, or termination of, our clinical trials will delay the filing of our New Drug Applications with the FDA and, ultimately, our ability to commercialize our product candidates and generate product revenues.

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If our competitors produce generic substitutes of our product candidates, we may face pricing pressures and lose sales.

The United States Food, Drug and Cosmetic Act and FDA regulations and policies provide incentives to manufacturers to challenge patent validity or create modified, non-infringing versions of a drug in order to facilitate FDA approval of an Abbreviated New Drug Application for generic substitutes. These same incentives also encourage manufacturers to submit New Drug Applications, known as 505(b)(2) Applications, which rely on literature and clinical data not originally obtained by the drug sponsor. In light of these incentives and especially if our product candidates and any other products we may in-license are commercially successful, other manufacturers may submit and gain successful expedited approval for either an Abbreviated New Drug Application or a 505(b)(2) Application that will compete directly with our products. Competitors may be able to offer such generic substitutes at a discount to the prices for our products.

Physicians and patients may not accept and use our drugs.

Even if the FDA approves our product candidates or those of our licensees, which are subject to licenses with us, physicians and patients may not accept and use them. Acceptance and use of our product candidates, or any of our future drugs, will depend upon a number of factors including, perceptions by members of the health care community, including physicians, about the safety and effectiveness of our drugs and the use of controlled substances; cost-effectiveness of our drugs relative to competing products;  availability of reimbursement for our product candidates and any other products we may in-license from government or other health care payors; and effectiveness of marketing and distribution efforts by us and our licensees and distributors, if any. The failure of any of these drugs to find market acceptance would harm our business.

Risks related to management

We rely on key executive officers and scientific and medical advisors and consultants, and their knowledge of our business and technical expertise would be difficult to replace.

We are highly dependent on Dr. Daniel G. Chain, our Chief Executive Officer, Chairman of the Board of Directors, and Elliot Maza, our President, Chief Financial Officer and Director. We do not have “key person” life insurance. We have entered into employment agreements with each of the foregoing employees. The loss of Dr. Chain or Elliot Maza may have an adverse effect on our ability to license or develop our technologies in a timely manner.

In addition, we rely on the members of our Scientific Advisory Board and our Clinical Advisory Board to assist us in formulating our research and development strategy. All of the members of our Scientific Advisory Board and our Clinical Advisory Board have other jobs and commitments and may be subject to non-disclosure obligations that may limit their availability to work with us.

Although we intend to outsource our development programs, we may need to hire additional qualified personnel with expertise in preclinical testing, clinical research and testing, government regulation, formulation and manufacturing and sales and marketing. We will require experienced scientific personnel in many fields in which there are a limited number of qualified personnel and we compete for qualified individuals with numerous biopharmaceutical companies, universities and other research institutions and other emerging entrepreneurial companies. Competition for such individuals, particularly in the New York City area, where our offices are headquartered, is intense and we cannot be certain that our search for such personnel will be successful. Furthermore, we are competing for employees against companies that are more established than we are and have the ability to pay more cash compensation than we do. As a result, depending upon the success and the timing of clinical tests, we may continue to experience difficulty in hiring and retaining highly skilled employees, particularly scientists. If we are unable to hire and retain skilled scientists, our business, financial condition, operating results and future prospects could be materially adversely affected.

Certain of our directors and scientific advisors have relationships with other biotechnology companies that may present potential conflicts of interest.

Our board members and officers currently and hereafter may serve, from time to time, as officers or directors of other biotechnology companies and, accordingly, from time to time, their duties and obligations to us may conflict with their duties and obligations to other entities. In addition, our board members have other jobs and commitments and may be subject to non-disclosure obligations that may limit their availability to work with us.

Risks related to our common stock

Shares of our stock suffer from low trading volume and wide fluctuations in market price.

Our common stock is currently quoted on the Over the Counter Bulletin Board trading system under the symbol ILNS. An investment in our common stock currently is highly illiquid and subject to significant market volatility. This illiquidity and volatility may be caused by a variety of factors including low trading volume and market conditions.

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In addition, the value of our common stock could be affected by actual or anticipated variations in our operating results; changes in the market valuations of other similarly situated companies providing similar services or serving similar markets; announcements by us or our competitors of significant acquisitions, strategic partnerships, collaborations, joint ventures or capital commitments; adoption of new accounting standards affecting our industry; additions or departures of key personnel; introduction of new products or services by us or our competitors; actual or expected sales of our common stock or other securities in the open market; the significant amount of outstanding convertible preferred stock and notes issued by us, which have priority and preferences over our common stock; the “market overhang” of a significant number of shares of our common stock that would be issued upon the exercise of outstanding stock options and warrants or the conversion of outstanding preferred stock or notes, especially if “full ratchet” anti-dilution provisions in those securities take effect; conditions or trends in the market in which we operate; and other events or factors, many of which are beyond our control.

Stockholders may experience wide fluctuations in the market price of our securities. These fluctuations may have an extremely negative effect on the market price of our securities and may prevent a stockholder from obtaining a market price equal to the purchase price such stockholder paid when the stockholder attempts to sell our securities in the open market. In these situations, the stockholder may be required either to sell our securities at a market price which is lower than the purchase price the stockholder paid, or to hold our securities for a longer period of time than planned. An inactive market may also impair our ability to raise capital by selling shares of capital stock and may impair our ability to acquire other companies by using common stock as consideration or to recruit and retain managers with equity-based incentive plans.

We cannot assure you that our common stock will become listed on the American Stock Exchange, Nasdaq or any other securities exchange.

We plan to seek listing of our common stock on the American Stock Exchange or Nasdaq. However, we currently fall far below the initial listing standards of those exchanges and there are no assurances that we will be able to meet the initial listing standards of either of those or any other stock exchange, or that we will be able to maintain a listing of our common stock on either of those or any other stock exchange. Until our common stock is listed on the American Stock Exchange or Nasdaq or another stock exchange, we expect that our common stock will continue to trade on the Over-The-Counter Bulletin Board, where an investor may find it difficult to dispose of our shares of common stock. In addition, we would be subject to an SEC rule that, if we failed to meet the criteria set forth in such rule, imposes various requirements on broker-dealers who sell securities governed by the rule to persons other than established customers and accredited investors. Consequently, this SEC rule may deter broker-dealers from recommending or selling the common stock, which may further affect its liquidity. This circumstance could also make it more difficult for us to raise additional capital in the future.

The concentrated ownership of our capital stock may have the effect of delaying or preventing a change in control of our company.

Our directors, officers, principal stockholders and their affiliates beneficially own more than 50% of our outstanding common stock. The interests of our directors, officers, principal stockholders and their affiliates may differ from the interests of other stockholders. Our directors, officers, principal stockholders and their affiliates will be able to exercise significant influence over all matters requiring stockholder approval, including the election of directors, amendments to our certificate of incorporation and certificates of designations for preferred stock and approval of mergers, acquisitions and other significant corporate transactions.

We will continue to incur increased costs as a result of being an operating public company.

As a public operating company, we incur significant legal, accounting and other expenses that we did not incur as a private company. If our stock becomes listed on Nasdaq or another major exchange or if our total assets exceed $10 million at the end of any fiscal year, we will also incur additional compliance expenses. It may be time consuming, difficult and costly for us to develop and implement the additional internal controls, processes and reporting procedures required by the Sarbanes-Oxley Act of 2002, SEC proxy rules, other government regulations affecting public companies and/or stock exchange compliance requirements. We may need to hire additional financial reporting, internal auditing and other finance staff in order to develop and implement appropriate additional internal controls, processes and reporting procedures. In addition, we incur increased costs associated with our public company reporting requirements.

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The regulatory background of the spouse of one of our founding principal stockholders may make it more difficult for us to obtain listing on Nasdaq or another securities exchange.

Margaret Chassman is one of our founding principal stockholders and is the spouse of Mr. David Blech. Mr. Blech has provided significant consulting services to us. He has been subject to certain regulatory proceedings, which may make our listing on a securities exchange difficult. In May 1998, David Blech pled guilty to two counts of criminal securities fraud and, in September 1999, he was sentenced by the United States District Court for the Southern District of New York to five years probation, which was completed in September 2004. Mr. Blech also settled administrative charges by the SEC in December 2000 arising out of the collapse in 1994 of D. Blech & Co., of which Mr. Blech was president and the sole stockholder. The settlement prohibits Mr. Blech from engaging in future violations of the federal securities laws and from association with any broker-dealer. In addition, the District Business Conduct Committee for District No. 10 of NASD Regulation, Inc. reached a decision, dated December 3, 1996, in a matter entitled District Business Conduct Committee for District No. 10 v. David Blech, regarding the alleged failure of Mr. Blech to respond to requests by the staff of the National Association of Securities Dealers, Inc. (NASD) for documents and information in connection with seven customer complaints against various registered representatives of D. Blech & Co. The decision found that Mr. Blech failed to respond to such requests in violation of NASD rules and that Mr. Blech should, therefore, be censured, fined $20,000 and barred from associating with any member firm in any capacity. Furthermore, Mr. Blech was discharged in bankruptcy in the United States Bankruptcy Court for the Southern District of New York in March 2000. This regulatory background may delay or impede access to listing our common stock on a securities exchange.

Our common stock is considered “a penny stock.”

The SEC has adopted regulations that generally define “penny stock” to be an equity security that has a market price of less than $5.00 per share, subject to specific exemptions. The market price of our common stock is less than $5.00 per share and therefore may be a “penny stock” according to SEC rules. This designation requires any broker or dealer selling these securities to disclose certain information concerning the transaction, obtain a written agreement from the purchaser and determine that the purchaser is reasonably suitable to purchase the securities. These rules may restrict the ability of brokers or dealers to sell our common stock and may affect the ability of investors to sell their shares of common stock.

There may be issuances of shares of preferred stock in the future that could have superior rights to our common stock.

We have provisions authorizing “blank check” preferred stock and we are therefore authorized to issue shares of preferred stock. Accordingly, our board of directors has the authority to fix and determine the relative rights and preferences of preferred shares, as well as the authority to issue such shares, without further stockholder approval. As a result, our board of directors could authorize the issuance of  one or more series of preferred stock that would grant to holders preferred rights to our assets upon liquidation, the right to receive dividends before dividends would be declared to common stockholders and the right to the redemption of such shares, together with a premium, prior to any redemption of the common stock. To the extent that we do issue such additional shares of preferred stock, the rights of the holders of the common stock would be impaired thereby, including without limitation, with respect to liquidation.

The exchange of Series B Preferred Stock for Common Stock may be challenged by existing common stockholders.

On or about July 10, 2007, we issued Series B Preferred Stock to certain of our common stockholders who held Series B Preferred Stock in Intellect Neurosciences (USA), Inc., prior to our merger with GlobePan Resources, Inc. in exchange for their common stock in Intellect Neurosciences, Inc. Our Board of Directors determined that this exchange is in the best interest of our company and its shareholders and recommended that the shareholders approve this exchange. More than two thirds of our common stockholders have approved the exchange. However, some common shareholders may object to the exchange of common stock and issuance of Series B Preferred Stock.

We have never paid nor do we expect in the near future to pay dividends.

We have never paid cash dividends on our capital stock and do not anticipate paying any cash dividends on our common stock for the foreseeable future.

We and our security holders are not subject to some reporting requirements applicable to most public companies; therefore, investors may have less information on which to base an investment decision.

We do not have a class of securities registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Therefore, we do not prepare proxy or information statements in accordance with Section 14(a) of the Exchange Act with respect to matters submitted to the vote of our security holders. Our officers, directors and beneficial owners of more than 10% of our common stock are not required to file statements of beneficial ownership on SEC Forms 3, 4 and 5 pursuant to Section 16 of the Exchange Act and beneficial owners of more than 5% of our outstanding common stock are not required to file reports on SEC Schedules 13D or 13G. Therefore, investors in our securities will not have any such information available in making an investment decision.

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ITEM 2.            PROPERTIES

We lease approximately 4,700 square feet of office space at 7 West 18th Street, 9th Floor, New York, New York, 10011. The lease expires on July 31, 2010. We sublease the majority of the space to Crenshaw Communications, Inc., a strategic public relations agency.

Previously, our drug discovery and drug candidate selection groups were located in Nes-Ziona, Israel in leased laboratory and office space in the Weizmann Science Park. This facility has approximately 9,600 square feet of combined office space and non-GMP research laboratories. We closed this facility during the fiscal quarter ending June 30, 2008. The lease expires on October 14, 2011. The lease is held by our wholly-owned subsidiary, Intellect Israel.  We are in the process of reaching an agreement with the landlord of the Israeli facility pursuant to which the lease will be terminated in exchange for surrender of amounts available under certain lease guarantees and an agreement by Intellect Israel to pay the landlord certain costs related to rewiring the facility, estimated at approximately $12,000.

ITEM 3.            LEGAL PROCEEDINGS

MICHAEL BRAUSER vs. INTELLECT NEUROSCIENCES, INC., DAVID BLECH and MARGIE CHASSMAN (DISMISSED).

As of June 30, 2009 and continuing through the date of filing of this report, we are in default on convertible promissory notes with an aggregate carrying value of $5.3 million. On October 21, 2008, one of our note holders filed a complaint in the United States District Court of the Southern District of New York claiming that approximately $541,000 of principal and accrued interest is past due and that he is entitled to a money judgment against us for all amounts due under the note, plus attorney’s fees, costs and disbursements. David Blech and Margie Chassman provided personal guarantees to this note holder guaranteeing all of our obligations under the note. Margie Chassman is one of our principal shareholders and David Blech is her husband and a consultant to the Company.  On January 5, 2009, Judge Shira A. Scheindlin issued an order setting a discovery schedule and referring the matter for mediation. On March 26, 2009, we entered into a Settlement and General Release with the note holder concerning amounts due under his note. In connection with the settlement, Margie Chassman purchased the note from the note holder and agreed to cancel it. In exchange, we issued Margie Chassman an additional Senior Note Payable (as defined in Note 7 of Notes to Consolidated Financial Statements, Convertible Promissory Notes Payable) with a face amount of $310,000 and repaid $100,000 of Notes held by Ms. Chassman. We did not issue any additional warrants to Ms. Chassman. The matter was subsequently dismissed by the court with prejudice.

ITEM 4.            SUBMISSION OF MATTERS to a VOTE of SECURITY HOLDERS

None

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PART II

ITEM 5.            MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock is quoted on the Over-The-Counter (OTC) Bulletin Board under the symbol “ILNS.OB” and is not listed on any exchange. The following table sets forth the range of high and low bid prices as reported for each period indicated.

	High		Low
Fiscal year ended June 30, 2009
September 30,	$	0.45	$	0.20
December 31,		0.33		0.07
March 31,		0.35		0.06
June 30,		0.32		0.14
Fiscal year ended June 30, 2008
September 30,	$	1.04	$	0.49
December 31,		0.60		0.19
March 31,		0.85		0.26
June 30,		0.95		0.30

The foregoing quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.

Holders

As of June 30, 2009, the Company had 626 common stock holders of record.

Dividends

We have never paid cash dividends on our capital stock. There are no restrictions that would limit us from paying dividends; however we do not anticipate paying any cash dividends for the foreseeable future.

Securities Authorized for Issuance under Equity Compensation Plans

The following table provides information as of June 30, 2009 about the common stock that may be issued upon the exercise of options granted to employees, consultants or members of our board of directors under all of our existing equity compensation plans, including the 2005 Stock Option Plan and the 2006 Stock Option Plan.

	Number of Securities Issuable Upon Exercise of Outstanding Options, Warrants and Rights		Weighted Average Exercise Price of Outstanding Options, Warrants and Rights		Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans
Plan Catergory
Equity compensation plans approved by security holders		12,405,478	$	0.74		841,022
Equity compensation plans not approved by security holders
Total		12,405,478	$	0.74		841,022

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ITEM 6.  SELECTED FINANCIAL DATA

[Not applicable to smaller reporting companies]

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ITEM 7.              MANAGEMENTS’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements included elsewhere in this report and the information described under the caption “Risk Factors” and “Special Note Regarding Forward Looking Statements” above.

General

We are a biopharmaceutical company developing and advancing a patent portfolio related to specific therapeutic approaches for treating Alzheimer’s disease (“AD”). In addition, we are developing proprietary drug candidates to treat AD and other diseases associated with oxidative stress.

. Since our inception in 2005, we have devoted substantially all of our efforts and resources to advancing our intellectual property portfolio and research and development activities.  We have entered into license and other agreements with large pharmaceutical companies related to our patent estate, however, neither we nor any of our licensees have obtained regulatory approval for sales of any product candidates covered by our patents. We operate under a single segment. Our fiscal year end is June 30.

Our core business strategy is to leverage our intellectual property estate through license and other arrangements and to develop our proprietary compounds that we have purchased, developed internally or in-licensed from universities and others, through human proof of concept (Phase II) studies or earlier if appropriate and then seek to enter into collaboration agreements, licenses or sales to complete product development and commercialize the resulting drug products. Our objective is to obtain revenues from licensing fees, milestone payments, development fees and royalties related to the use of our intellectual property estate and the use of our proprietary compounds for specific therapeutic indications or applications.

In May 2008, we entered into a License Agreement with AHP Manufacturing BV, acting through its Wyeth Medica Ireland Branch, (“Wyeth”) and Elan Pharma International Limited (“Elan”) to provide Wyeth and Elan (the “Licensees”) certain license rights under our ANTISENILIN patent estate (the “Licensed Patents”) , which relates to certain antibodies that may serve as potential therapeutic products for the treatment for Alzheimer’s Disease (the “Licensed Products”) and for the research, development, manufacture and commercialization of Licensed Products. In exchange for the licenses, the Licensees collectively paid us an up-front payment of $1,000,000 and a milestone payment of $1,000,000, and we may be entitled to milestone and royalty payments in the future. We recognized $33,333 and $1,966,667 as revenue during the fiscal years ended June 30, 2008 and June 30, 2009, respectively.

In October 2008, we entered into an Option and License Agreement (the “Option Agreement”) with a top-tier global pharmaceutical company (“Option Holder”) regarding an option to purchase a license under certain patents (defined as “Subject Patents” in the Option Agreement). In consideration of the Option, the Option Holder paid us a non-refundable fee of five hundred thousand dollars ($500,000) (the “Option Fee”). In consideration of the exercise of the Option, the Option Holder agreed to pay us two million dollars ($2,000,000) (the “Exercise Fee”). Two hundred and fifty thousand dollars ($250,000) of the Option Fee is creditable against the Exercise Fee. The patents are the same patents and patent applications as the Licensed Patents arising from the Agreement with Elan and Wyeth described above.  Effective as of December 19, 2008, the Option Holder became the Licensee of the patents by paying us $1,550,000, representing the Exercise Fee described in the Option Agreement as adjusted by subsequent discussions between the parties to the Option Agreement.  We recognized $2,050,000 as revenue during the fiscal year ended June 30, 2009.

In April 2009, we entered into an Option Agreement (the “Agreement”) with Glaxo Group Limited (“GSK”) regarding an option to purchase a license under certain of Intellect’s patents and patent applications (the “Subject Patents”) related to antibodies and methods of treatment for Alzheimer’s disease. The patents are the same patents and patent applications as the Licensed Patents and Subject Patents described above. Pursuant to the Agreement, we granted GSK an irrevocable option (the “Option”) to acquire a non-exclusive, royalty bearing license under the Subject Patents with the right to grant sublicenses, to develop, have developed, make, have made, use, offer to sell, sell, import and have imported Licensed Products in the Territory in the Field (as such terms are defined in the Agreement). Upon exercise of the Option by GSK, we will be entitled to fees, and we may be entitled to milestone payments and royalties from potential future drug sales.

Our most advanced drug candidate, OXIGON, is a chemically synthesized form of a small, potent, dual mode of action, naturally occurring molecule.  We commenced human Phase I clinical trials for OXIGON on December 1, 2005 in the Netherlands and completed Phase I clinical trials on November 15, 2006. We have designed a Phase IIa clinical trial to test OXIGON in 80 to 100 mild to moderate AD patients and plan to initiate that trial during 2010 if we have sufficient financial resources. We plan to orally administer OXIGON to evaluate the drug’s activity in patients as measured by changes in certain biomarkers that correlate with the condition of AD.

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Our pipeline includes drugs based on our immunotherapy platform technologies, ANTISENILIN and RECALL-VAX. These immunotherapy programs are based on monoclonal antibodies and therapeutic vaccines, respectively, to prevent the accumulation and toxicity of the amyloid beta toxin. Both are in pre-clinical development. Our lead product candidate in our immunotherapy programs is IN-N01, a monoclonal antibody that has undergone certain procedures in the humanization process at MRCT in the UK.

OXIGON, RECALL-VAX and ANTISENILIN are our trademarks. Each trademark, trade name or service mark of any other company appearing in this Annual Report on Form 10-K belongs to its respective holder.

Our current business is focused on granting licenses to our patent estate to large pharmaceutical companies and on research and development of proprietary therapies for the treatment of AD through outsourcing and other arrangements with third parties. We expect research and development, including patent related costs, to continue to be the most significant expense of our business for the foreseeable future. Our research and development activity is subject to change as we develop a better understanding of our projects and their prospects.

Total research and development costs from inception through June 30, 2009 were $13,271,797, as described in the table below:

R&D Expenses incurred through June 2009 - By Program
Period	Research and Development Program
	Oxigon		Antisenilin		Recall		Beta vax		Total R&D
July 2008- June 2009	$	-	$	444,928	$	-	$	-	$	444,928
July 2007- June 2008		734,457		1,482,141		50,000		1,032,142		3,298,740
July 2006- June 2007		3,069,542		2,062,856		50,000		687,618		5,870,016
January  - June 06		919,606		697,434		25,000		697,436		2,339,476
April 2005 - December 2006		464,545		364,547		25,000		464,545		1,318,637
Total for Program	$	5,188,150	$	5,051,906	$	150,000	$	2,881,741	$	13,271,797

We have sublet approximately 75% of our New York City office space and closed our Israeli research laboratory to conserve our financial resources. The lease is held by our wholly-owned subsidiary, Intellect Israel.  We are in the process of reaching an agreement with the landlord of the Israeli facility pursuant to which the lease will be terminated in exchange for surrender of amounts available under certain lease guarantees and an agreement by Intellect Israel to pay the landlord certain costs related to rewiring the facility, estimated at approximately $12,000.

. We have written off the carrying value of the remaining laboratory equipment. We expect to continue our research and development activity through outsourcing and other third party arrangements.

Reverse Merger

On January 25, 2007, GlobePan Resources, Inc. (“GlobePan”) (now known as Intellect Neurosciences, Inc.) entered into an agreement and plan of merger with Intellect Neurosciences, Inc. (now known as Intellect USA, Inc.) and INS Acquisition, Inc., a newly formed, wholly-owned Delaware subsidiary of GlobePan Resources, Inc. also called Acquisition Sub. On January 25, 2007, Acquisition Sub merged with and into Intellect Neurosciences, Inc. (now known as Intellect USA, Inc.), Acquisition Sub ceased to exist and Intellect Neurosciences, Inc. (now known as Intellect USA, Inc.) survived the merger and became the wholly-owned subsidiary of GlobePan Resources, Inc.  Immediately following the merger, Intellect Neurosciences, Inc., the surviving entity in the merger, changed its name to Intellect USA, Inc. and GlobePan Resources, Inc. changed its name to Intellect Neurosciences, Inc. Therefore, as of January 26, 2007, Intellect Neurosciences, Inc. is the name of our parent holding company.  The name of our wholly-owned operating subsidiary is Intellect USA, Inc., which owns all of the shares of Intellect Neurosciences (Israel) Ltd., an Israeli company.

Following the merger and after giving effect to the options we issued immediately following the merger, there were 35,075,442 shares of our common stock issued and outstanding on an actual basis and 55,244,385 shares of our common stock issued and outstanding on a fully diluted basis. In our determination of the number of shares of our common stock issued and outstanding on a fully diluted basis, we (i) include the aggregate 9,000,000 shares of our common stock retained by existing GlobePan stockholders, (ii) include the aggregate 26,075,442 shares of our common stock received by former holders of Intellect Neurosciences, Inc. (now known as Intellect USA, Inc.) capital stock, (iii) assume the issuance of all shares potentially available for issuance under our 2005 and our 2006 equity incentive plans, regardless of whether such shares are currently covered by options, and (iv) assume the conversion of all outstanding warrants and convertible notes into shares of our common stock.

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  In connection with the merger, we reflected in the year ended June 30, 2007 a charge of $7,020,000, representing the shares issued to the GlobePan shareholders.

Liquidity and Capital Resources

Since our inception in 2005, we have mainly generated losses from operations and we anticipate that we will continue to generate significant losses from operations for the foreseeable future. As of June 30, 2009 and June 30, 2008, our accumulated deficit was approximately $42.2 million and $44 million, respectively. Our net income/(loss) from operations for the years ended June 30, 2009 and 2008 was $0.3 million and $ (7.3) million, respectively.  Our cash outlays from operations were $0.7 million and $3.8 million for the years ended June 30, 2009 and June 30, 2008, respectively. Our capital shows a deficit of $19.7 million and $21.9 million as of June 30, 2009 and June 30, 2008, respectively.

We have limited capital resources and operations since inception have been funded with the proceeds from equity and debt financings and license fee arrangements.  As of June 30, 2009, we had cash and cash equivalents of approximately $271,000. We anticipate that our existing capital resources will not enable us to continue operations beyond mid-October 2009, or earlier if unforeseen events or circumstances arise that negatively affect our liquidity. If we fail to raise additional capital or obtain substantial cash inflows from potential partners prior to mid-October 2009, we will be forced to cease operations. We are in discussions with several investors concerning our financing options. We cannot assure you that these discussions will result in available financing in a timely manner, on favorable terms or at all.

As of June 30, 2009 and continuing through the date of filing of this report, we  are in default on convertible promissory notes with an aggregate carrying value of $5.3 million. On October 21, 2008, one of our note holders filed a complaint in the United States District Court of the Southern District of New York claiming that approximately $541,000 of principal and accrued interest is past due and that he is entitled to a money judgment against us for all amounts due under the note, plus attorney’s fees, costs and disbursements. David Blech and Margie Chassman provided personal guarantees to this note holder guaranteeing all of our obligations under the note. Margie Chassman is one of our principal shareholders and David Blech is her husband and a consultant to the Company.  On January 5, 2009, Judge Shira A. Scheindlin issued an order setting a discovery schedule and referring the matter for mediation.  On March 26, 2009, we entered into a Settlement and General Release with the note holder concerning amounts due under his note. In connection with the settlement, Margie Chassman purchased the note from the note holder and agreed to cancel it. In exchange, we issued Margie Chassman an additional Senior Note Payable (as defined in Note 7 of Notes to Consolidated Financial Statements, Convertible Promissory Notes Payable) with a face amount of $310,000 and repaid $100,000 of Notes held by Ms. Chassman. We did not issue any additional warrants to Ms. Chassman. The matter was subsequently dismissed by the court with prejudice.

The audit report prepared by our independent registered public accounting firm relating to our consolidated financial statements for the period ended June 30, 2009 includes an explanatory paragraph expressing the substantial doubt about our ability to continue as a going concern.

Even if we obtain additional financing, our business will require substantial additional investment that we have yet to secure. We are uncertain as to how much we will need to spend in order to develop, manufacture and market new products and technologies in the future. We expect to continue to spend substantial amounts on research and development, including amounts that will be incurred to conduct clinical trials for our product candidates. Further, we will have insufficient resources to fully develop any new products or technologies unless we are able to raise substantial additional financing on acceptable terms or secure funds from new or existing partners. Our failure to raise capital when needed will adversely affect our business, financial condition and results of operations, and could force us to reduce or discontinue our operations at some time in the future, even if we obtain financing in the near term.

Results of Operations

Year Ended June 30, 2009 Compared to the Year Ended June 30, 2008:

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	Twelve Months Ended June 30,
			(in thousands)
	2009		2008			Change
Net income/(loss) from operations	$	251	$	(7,348	)	$	7,599
Net other income (expenses):		1,596		26,973			(25,377	)
Net income/(loss)	$	1,847	$	19,625		$	(17,778	)

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Net income/(loss) from operations increased by approximately $7.6 million as a result of the following:

	(in thousands)
Increase in license fee revenue	$	(4,016	)
Decrease in clinical expenses and R&D fees and expenses		(1,801	)
Decrease in salaries, benefits and Board compensation		(1,499	)
Decrease in professional fees		(85	)
Decrease in other G&A expenses		(198	)
	$	(7,599	)

The increase in license fee revenue is related to the milestones that we received from Elan and Wyeth and Option and Exercise fees that we received from another top tier, global pharmaceutical company pursuant to our respective license agreements with such companies.

The decrease in clinical fees and R&D expenses relates to our termination of research activity at the Israel facility.

The decrease in compensation and benefit costs is related to a decrease in staff levels in our New York location and the closing of our Israeli research laboratory.

The decrease in professional fees is due to a decrease in investor relation fees offset by an increase in accounting and legal costs.

The decrease in other expenses is due to a decrease in office and travel expenses.

Other income decreased by approximately $25.4 million as a result of the following:

This decrease is mainly due to changes in the fair value of derivative instruments and preferred stock liability of $29.6 million related to the valuation of the warrants associated with the Series B Preferred stock, Convertible Promissory Notes, and the New Series B Preferred Stock liability, offset by a reduction in interest expense related to our Convertible Promissory notes and a reduction in amortization costs.

Impact of Inflation

The impact of inflation upon our revenue and income/(loss) from continuing operations during each of the past two fiscal years has not been material to our financial position or results of operations for those years because we have no products for sale and do not maintain any inventories whose costs are affected by inflation.

Off –Balance Sheet Arrangements

As of June 30, 2009, we had no material off-balance sheet arrangements other than operating leases and obligations under various strategic agreements as follows:

Under a License Agreement with New York University (“NYU”) and a similar License Agreement with University of South Alabama Medical Science Foundation (“SAMSF”) related to our OXIGON program, we are obligated to make future payments totaling approximately $1.5 million to each of NYU and SAMSF upon achievement of certain milestones based on phases of clinical development and approval of the FDA (or foreign equivalent) and also to pay each of NYU and SAMSF a royalty based on product sales by Intellect or royalty payments received by Intellect.

Pursuant to a Letter Agreement executed in January 2006 between Intellect USA and the Institute for the Study of Aging (the “ISOA”), we are obligated to pay a total of $225,500 of milestone payments contingent upon future clinical development of OXIGON.

Under a Research Agreement with MRCT, as amended, we are obligated to make future research milestone payments totaling approximately $560,000 to MRCT related to the development of the 82E1 humanized antibody and to pay additional milestones related to the commercialization, and a royalty based on sales, of the resulting drug products. MRCT has achieved certain of the research milestones and we have included $350,000 of the total $560,000 in accrued expenses.

Under the terms of a Beta-Amyloid Specific, Humanized Monoclonal Antibody Purchase and Sale Agreement with IBL we agreed to pay IBL a total of $2,125,000 upon the achievement of certain milestones plus a specified royalty based on sales of any pharmaceutical product derived from the 82E1or 1A10 antibodies. We have paid $40,000 to date.

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Under the terms of a Royalty Participation Agreement, which was approved by our Board of Directors as of May 2, 2008, but which became effective as of July 31, 2008, certain of our lenders are entitled to an aggregate share of 25% of future royalties that we receive from the license of our ANTISENILIN patent estate.

In the ordinary course of business, we enter into agreements with third parties that include indemnification provisions which, in our judgment, are normal and customary for companies in our industry sector. These agreements are typically with business partners, clinical sites, and suppliers. Pursuant to these agreements, we generally agree to indemnify, hold harmless, and reimburse indemnified parties for losses suffered or incurred by the indemnified parties with respect to our product candidates, use of such product candidates, or other actions taken or omitted by us. The maximum potential amount of future payments we could be required to make under these indemnification provisions is unlimited. We have not incurred material costs to defend lawsuits or settle claims related to these indemnification provisions. As a result, the estimated fair value of liabilities relating to these provisions is minimal. Accordingly, we have no liabilities recorded for these provisions as of June 30, 2009.

In the normal course of business, we may be confronted with issues or events that may result in a contingent liability. These generally relate to lawsuits, claims, environmental actions or the actions of various regulatory agencies. We consult with counsel and other appropriate experts to assess the claim. If, in our opinion, we have incurred a probable loss as set forth by accounting principles generally accepted in the United States, an estimate is made of the loss and the appropriate accounting entries are reflected in our consolidated financial statements. After consultation with legal counsel, we do not anticipate that liabilities arising out of currently pending or threatened lawsuits and claims will have a material adverse effect on our consolidated financial position, results of operations or cash flows.

Critical Accounting Estimates and New Accounting Pronouncements

Critical Accounting Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect reported amounts and related disclosures in the financial statements. Management considers an accounting estimate to be critical if it requires assumptions to be made that were uncertain at the time the estimate was made, and changes in the estimate or different estimates that could have been selected could have a material impact on our consolidated results of operations or financial condition.

Share-Based Payments - As of July 1, 2006, we adopted SFAS 123(R), "Share-Based Payment", which establishes standards for share-based transactions in which an entity receives employee's services for equity instruments of the entity, such as stock options, or liabilities that are based on the fair value of the entity's equity instruments or that may be settled by the issuance of such equity instruments. SFAS 123(R) supersedes the option of accounting for share-based compensation transactions using APB Opinion No. 25, "Accounting for Stock Issued to Employees", and requires that companies expense the fair value of stock options and similar awards, as measured on the awards' grant date, date of adoption, and to awards modified, repurchased or cancelled after that date.

We estimate the value of stock option awards on the date of grant using the Black-Scholes-Merton option-pricing model (the “Black-Scholes model”). The determination of the fair value of share-based payment awards on the date of grant is affected by our stock price as well as assumptions regarding a number of complex and subjective variables. These variables include our expected stock price volatility over the term of the awards, expected term, risk-free interest rate, expected dividends and expected forfeiture rates.

If factors change and we employ different assumptions in the application of SFAS 123(R) in future periods, the compensation expense that we record under SFAS 123(R) may differ significantly from what we have recorded in the current period. There is a high degree of subjectivity involved when using option pricing models to estimate share-based compensation under SFAS 123(R). Consequently, there is a risk that our estimates of the fair values of our share-based compensation awards on the grant dates may bear little resemblance to the actual values realized upon the exercise, expiration, early termination or forfeiture of those share-based payments in the future. Employee stock options may expire worthless or otherwise result in zero intrinsic value as compared to the fair values originally estimated on the grant date and reported in our financial statements. Alternatively, value may be realized from these instruments that are significantly in excess of the fair values originally estimated on the grant date and reported in our financial statements.  During the year ended June 30, 2009, we do not believe that reasonable changes in the projections would have had a material effect on share-based compensation expense.

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Research and Development Costs and Clinical Trial Expenses - Research and development costs include costs directly attributable to the conduct of research and development programs, including the cost of salaries, payroll taxes, employee benefits, materials, supplies, maintenance of research equipment, costs related to research collaboration and licensing agreements, the cost of services provided by outside contractors, including services related to our clinical trials, clinical trial expenses, the full cost of manufacturing drugs for use in research, preclinical development, and clinical trials. All costs associated with research and development is expensed as incurred.

 Warrants - Warrants issued in connection with our Series B Preferred Stock and Convertible Promissory Notes have been classified as liabilities due to certain provisions that may require cash settlement in certain circumstances. At each balance sheet date, we adjust the warrants to reflect their current fair value. We estimate the fair value of these instruments using the Black-Scholes option pricing model which takes into account a variety of factors, including historical stock price volatility, risk-free interest rates, remaining term and the closing price of our common stock. Changes in the assumptions used to estimate the fair value of these derivative instruments could result in a material change in the fair value of the instruments. We believe the assumptions used to estimate the fair values of the warrants are reasonable.  See Item 7A, Quantitative and Qualitative Disclosures about Market Risk, for additional information on the volatility in market value of derivative instruments.

Restructuring Related Assessments - During the fourth quarter of fiscal 2008, we effectively closed our Israeli laboratory and terminated all but three of the remaining employees.  In accordance with SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities”, we have estimated the future sublease income from our Israeli laboratory through the end of the lease period, which ends in October 2011, and have recorded rent expense for the year ended June 30, 2008 based on the present value of the excess of our rental commitment in Israel through October 2011 over the estimated future sublease income from the laboratory during that period. In addition, we have written down the cost basis of the remaining laboratory equipment to our estimate of fair value for such equipment.

Revenue Recognition - We recognize revenue in accordance with Staff Accounting Bulletin No. 104, “Revenue Recognition” (“SAB 104”), Financial Accounting Standards Board (“FASB”') and Emerging Issues Task Force No. 00-21 “Accounting for Revenue Arrangements with Multiple Deliverables” (“EITF 00-21”). Non-refundable upfront and research and development milestone payments and payments for services are recognized as revenue as the related services are performed over the term of the collaboration.

New Accounting Pronouncements

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, which is effective for fiscal years beginning after November 15, 2007. SFAS No. 159 also amends certain provisions of SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities. This statement permits entities to choose to measure many financial instruments and certain other items at fair value.  We do not expect our adoption of SFAS No. 159 in fiscal year 2009 to have a material impact on our results of operations or financial position.

In April 2007, the FASB issued FSP FIN 39-1, which amends FASB Interpretation (“FIN”) No. 39, "Offsetting of Amounts Related to Certain Contracts ” (“FIN 39”), to permit a reporting entity that is party to a master netting arrangement to offset the fair value amounts recognized for the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) against fair value amounts recognized for derivative instruments that have been offset under the same master netting arrangement in accordance with FIN 39. FSP FIN 39-1 was effective for fiscal years beginning after November 15, 2007. The adoption of FSP FIN 39-1 on July 1, 2008 is not expected to have an impact on the Company’s results of operations or financial condition.

In May 2007, the FASB issued FASB Staff Position (“FSP”) FIN No. 48-1, Definition of Settlement in FASB Interpretation No. 48. FSP FIN No. 48-1 provides guidance on how to determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits. FSP FIN No. 48-1 is effective retroactively to April 28, 2007. The adoption of this standard did not have a significant impact on the Company’s consolidated financial position or results of operations.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), "Business Combinations" ("SFAS No. 141(R)"). SFAS No. 141(R) replaces SFAS No. 141, "Business Combinations," however, it retains the fundamental requirements of the former Statement that the acquisition method of accounting (previously referred to as the purchase method) be used for all business combinations and for an acquirer to be identified for each business. SFAS No. 141(R) defines the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as the date that the acquirer achieves control. Among other requirements, SFAS No. 141(R) requires the acquiring entity in a business combination to recognize the identifiable assets acquired, liabilities assumed and any non-controlling interest in the acquiree at their acquisition-date fair values, with limited exceptions; acquisition-related costs generally will be expensed as incurred. SFAS No. 141(R) requires certain financial statement disclosures to enable users to evaluate and understand the nature and financial effects of the business combination. SFAS No. 141(R) must be applied prospectively to business combinations that are consummated beginning in the Company's fiscal 2010. The Company's adoption of SFAS No. 141(R) is not expected to have a material effect on its consolidated financial statements.

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In December 2007, the U.S. Securities and Exchange Commission issued Staff Accounting Bulletin No. 110 ("SAB 110"). This staff accounting bulletin ("SAB") expresses the views of the staff regarding the use of a "simplified" method, as discussed in SAB No. 107 ("SAB 107"), in developing an estimate of expected term of "plain vanilla" share options in accordance with SFAS No. 123 (revised 2004), Share-Based Payment. In particular, the staff indicated in SAB 107 that it will accept a company's election to use the simplified method, regardless of whether the company has sufficient information to make more refined estimates of expected term. At the time SAB 107 was issued, the staff believed that more detailed external information about employee exercise behavior (e.g., employee exercise patterns by industry and/or other categories of companies) would, over time, become readily available to companies. Therefore, the staff stated in SAB 107 that it would not expect a company to use the simplified method for share option grants after December 31, 2007. The staff understands that such detailed information about employee exercise behavior may not be widely available by December 31, 2007. Accordingly, the staff will continue to accept, under certain circumstances, the use of the simplified method beyond December 31, 2007. The Company's adoption of SAB 111 is not expected to have a material effect on its consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements” (“SFAS No. 160”). This Statement amends Accounting Research Bulletin (ARB) No. 51 to establish accounting and reporting standards for the non-controlling (minority) interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a non-controlling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements will have no impact. SFAS No. 160 is effective for the Company’s fiscal year beginning July 1, 2009. Management has determined that the adoption of this standard will not have an impact on the Company’s financial statements.

In February 2008, the FASB issued FSP No. FAS 157-2, "Effective Date of FASB Statement No. 157". This FSP delays the effective date of SFAS No. 157, "Fair Value Measurements", for non-financial assets and non-financial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). This FSP defers the effective date of SFAS No. 157 to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years for items within the scope of this FSP.

In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities - an amendment of FASB Statement No. 133. This statement changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity's financial position, financial performance, and cash flows. SFAS No. 161 is effective for fiscal years and interim periods beginning after November 15, 2008. The Company's adoption of SFAS No. 161 is not expected to have a material effect on its consolidated financial statements.

In April 2008, the FASB issued FASB Staff Position SOP 90-7-1, An Amendment of AICPA Statement of Position 90-7 (“FSP SOP 90-7-1”). FSP SOP 90-7-1 resolves the conflict between the guidance requiring early adoption of new accounting standards for entities required to follow fresh-start reporting under American Institute of Certified Public Accountants Statement of Position 90-7, Financial Reporting by Entities in Reorganization under the Bankruptcy Code, and other authoritative accounting standards that expressly prohibit early adoption. Specifically, FSP SOP 90-7-1 will require an entity emerging from bankruptcy that applies fresh-start reporting to follow only the accounting standards in effect at the date fresh-start reporting is adopted, which include those standards eligible for early adoption if an election is made to adopt early. Management has elected to only adopt new accounting standards in effect at the date fresh-start reporting is adopted and to not early adopt standards eligible for early adoption.

In May 2008, the FASB issued Staff Position No. APB 14-1, Accounting for Convertible Debt Instruments that may be Settled in Cash upon Conversion (Including Partial Cash Settlement), (the “FSP”). The adoption of this FSP will affect the accounting for convertible and exchangeable notes and convertible preferred units. The FSP requires the initial proceeds from the sale of our convertible and exchangeable senior notes and convertible preferred units to be allocated between a liability component and an equity component. The resulting discount will be amortized using the effective interest method over the period the debt is expected to remain outstanding as additional interest expense. The FSP is effective for our fiscal year beginning on July 1, 2008 and requires retroactive application. The Company is currently evaluating the impact that this will have on the Company’s results of operations or financial condition.

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In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles". This Statement identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States (the GAAP hierarchy). This Statement is effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. The Board does not expect that this Statement will result in a change in current practice. However, transition provisions have been provided in the unusual circumstance that the application of the provisions of this Statement results in a change in practice.

In June 2008, the FASB issued FSP EITF 03-6-1, which addresses whether instruments granted in equity-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing basic earnings per unit under the two-class method prescribed by SFAS 128. FSP EITF 03-6-1 is retrospectively effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years, with early application prohibited. The Company is evaluating the impact the adoption of FSP EITF 03-6-1 will have on its earnings per share calculations.

ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Fair Value of Warrants and Derivative Liabilities.

As of June 30, 2009, the value of our warrant liability was $0.3 million. We estimate the fair value of these instruments using the Black-Scholes option pricing models, which takes into account a variety of factors, including historical stock price volatility, risk-free interest rates, remaining maturity and the closing price of our common stock. We believe that the change in value from period to period is most significantly impacted by the closing price of our common stock at each reporting period. The following table illustrates the potential effect on the fair value of derivative securities of changes in certain assumptions made:

	Increase\decrease
10% increase in stock price	$	51,682
20% increase in stock price		107,496
30% increase in assumed volatility		166,792
10% decrease in stock price		(47,831	)
20% decrease in stock price		(91,364	)
30% decrease in assumed volatility		(130,666	)

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ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATE

CONTENTS

CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent  Registered Public Accounting Firm	44
Report of Independent Registered Public Accounting Firm	45
Consolidated Balance Sheet as of June 30, 2009 and 2008	46
Consolidated Statements of Operations for the years ended June 30, 2009, 2008 and for the period April 25, 2005 (inception) through June 30, 2009.	47
Consolidated Statement of Changes in Capital Deficiency for the years ended June 30, 2009 and 2008 and the period April 25, 2005 (inception) through June 30, 2009	48
Consolidated Statements of Cash Flows for the years ended June 30, 2009, 2008 and for the period April 25, 2005 (inception) through June 30, 2009.	49
Notes to the Consolidated Financial Statements	50

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Paritz     & Company, P.A	15 Warren Street, Suite 25 Hackensack, New Jersey 07601   (201) 342-7753 Fax:  (201) 342-7598 E-Mail:  PARITZ@paritz.com
Certified Public Accountants

Board of Directors and Stockholders

Intellect Neurosciences, Inc

We have audited the accompanying balance sheet of Intellect Neurosciences, Inc. and subsidiary (A Development Stage Company)  (the “Company”) as of June 30, 2009 and the related statements of operations, changes in capital deficiency and cash flows for the year ended June 30, 2009 and the period from inception (April 25, 2005) to June 30, 2009. We did not audit the statements of operations, changes in capital deficiency, and cash flows of the Company from inception (April 25, 2005) to June 30, 2008 (not presented separately herein). Those statements were audited by other auditors whose report has been furnished to us, and our opinion insofar as it relates to amounts included for that period is based solely on the report of the other auditors. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Intellect Neurosciences, Inc. and subsidiary (A Development Stage Company) as of June 30, 2009 and the results of its operations and its cash flows for the year ended June 30, 2009 and the period from inception (April 25, 2005) to June 30, 2009, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has a negative working capital position, a total capital deficiency, generated cash outflows from operating activities, experienced recurring net operating losses, is in default on certain obligations, and is dependent on equity and debt financing to support its business efforts. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

.

/s/ Paritz & Company, PA

Hackensack, New Jersey

October 6, 2009

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

Intellect Neurosciences, Inc.

We have audited the accompanying consolidated balance sheet of Intellect Neurosciences, Inc. and subsidiary (a development stage company) (the "Company") as of June 30, 2008, and the related consolidated statement of operations and cash flows for the year ended June 30, 2008, the consolidated statement of changes in capital deficiency for the period from April 25, 2005 (inception) through June 30, 2008 and the consolidated statements of operations and cash flows for the period from April 25, 2005 (inception) through June 30, 2008 (not presented separately herein). These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements enumerated above present fairly, in all material respects, the consolidated financial position of Intellect Neurosciences, Inc. and subsidiary as of June 30, 2008, and the consolidated results of their operations and their consolidated cash flows for the year ended June 30, 2008 in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has a negative working capital position, a total capital deficiency, generated cash outflows from operating activities, experienced recurring net operating losses, is in default on certain obligations, and is dependent on equity and debt financing to support its business efforts. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Eisner LLP

New York, New York

November 4, 2008

45

Intellect Neurosciences Inc. and Subsidiary

(a development stage company)

Consolidated Balance Sheet

	June 30, 2009			June 30, 2008
ASSETS
Current assets:
Cash and cash equivalents	$	270,588		$	210,758
Prepaid expenses & other current assets		14,390			18,203
Deferred debt costs, net		19,239			22,622
Total current assets	$	304,218		$	251,583
Fixed assets, net		162,760			367,962
Fixed assets held for sale					22,057
Security deposits		70,652			78,264
Restricted cash		-			34,056
Total Assets	$	537,630		$	753,922
LIABILITIES AND CAPITAL DEFICIENCY
Current Liabilities:
Accounts payable and accrued expenses	$	4,192,008		$	4,624,030
Convertible promissory notes		-			182,363
Convertible promissory notes (past due)		5,305,088			5,644,604
Accrued interest - convertible promissory notes		2,052,497			993,869
Derivative instruments		307,906			2,001,556
Preferred stock liability		872,867			2,434,383
Preferred stock dividend payable		1,574,035			1,085,062
Deferred credit		-			100,000
Total Current liabilities	$	14,304,400		$	17,065,867
Commitments and Contingencies
Notes payable (long term; net of debt discount of $121,395)		2,104,777			1,275,000
Notes payable, due to shareholder		3,773,828			3,423,828
Deferred lease liability		11,489			17,612
Deferred credit		-			900,000
Other long-term liabilities		-			46,049
Total Liabilities	$	20,194,495		$	22,728,356
Capital deficiency:
Preferred stock, $0.001 per share, 1,000,000 shares authorized
Series B Convertible Preferred stock - 459,309 shares designated and 459,309 shares issued (classified as liability above) (liquidation preference $9,611,952) Common stock, par value $0.001 per share, 100,000,000 shares authorized; 30,843,873 issued and outstanding	$	30,844		$	30,844
Additional paid in capital		22,488,585			22,017,778
Deficit accumulated during the development stage		(42,176,294	)		(44,023,056	)
Total Capital Deficiency	$	(19,656,865	)	$	(21,974,434	)
Total Liabilities and Capital Deficiency	$	537,630		$	753,922

See notes to consolidated financial statements

46

Intellect Neurosciences Inc. and Subsidiary

(a development stage company)

Consolidated Statements of Operations

	Full Year Ended
							April 25, 2005
	June 30,						(inception) through
							June 30, 2009
	2009			2008
Revenues:
License fees	$	4,016,667			-		$	4,016,667
Total revenue	$	4,016,667		$	-		$	4,016,667
Costs and Expenses:
Research and development	$	444,928			3,298,740		$	13,271,797
General and administrative		3,321,204			4,049,328			28,349,392
Total cost and expenses	$	3,766,132		$	7,348,068		$	41,621,189
Net income/ (loss) from operations	$	250,535		$	(7,348,068	)	$	(37,604,522	)
Other income/(expenses):
Interest expense	$	(1,831,972	)	$	(6,675,803	)	$	(11,665,715	)
Interest income		1,666			772		$	18,490
Changes in value of derivative instruments and preferred stock liability		4,105,608			33,648,202		$	14,511,058
Loss on extinguishment of debt		(701,869	)				$	(701,869	)
Other		22,796			-		$	(6,583,736	)
Write off of investment					-		$	(150,000	)
Total other income/(expense):	$	1,596,229		$	26,973,171		$	(4,571,772	)
Net income/(loss)	$	1,846,764		$	19,625,103		$	(42,176,294	)
Basic income per share	$	0.06		$	0.64
Diluted income per share	$	0.08		$	0.57
Weighted average number of shares outstanding:
Basic		30,843,873			30,876,324
Diluted		41,696,315			42,347,654

See notes to consolidated financial statements

47

Intellect Neurosciences Inc. and Subsidiary

(a development stage company)

Consolidated Statement of Changes in Capital Deficiency

	Common Stock						Preferred Stock
	Number of Shares			Amount			Number of Shares			Amount			Additional paid in capital			Deficit accumulated during the development stage			Total
Issuance of common stock (April 2005) ($.001 per share)		12,078,253		$	12,078														$	12,078
Issuance of common stock (May 2005) ($.001 per share)		9,175,247			9,175															9,175
Value of warrants issued to Goulston & Storrs (June 2005)														8,890						8,890
Net loss for period																	(789,177	)		(789,177	)
Balance at June 30, 2005		21,253,500			21,253									8,890			(789,177	)		(759,034	)
Issuance of Series A preferred stock (January 2006) ($.001 per share)								2,255			2			198,866						198,868
Exercise of Warrant (April 2006) ($.001 per share)		100,000			100															100
Excess of proceeds over fair value of Series B preferred														4,543,141						4,543,141
Net loss for the period																	(7,458,092	)		(7,458,092	)
Balance at June 30, 2006		21,353,500			21,353			2,255			2			4,750,897			(8,247,269	)		(3,475,017	)
Excess of proceeds over fair value of Series B preferred														314,845						314,845
Conversion of Series B preferred shares into common shares upon merger (January 2007)		4,593,091			4,593									3,109,522						3,114,115
Conversion of Series A preferred shares into common shares upon merger (January 2007)		128,851			129			(2,255	)		(2	)		(127	)					-
Series B preferred dividend recorded as a capital contribution (January 2007)														387,104						387,104
Shares issued in conjunction with merger (January 2007)		9,000,000			9,000									7,011,000						7,020,000
Reconversion of common shares back to Series B preferred shares (May 2007)		(4,593,091	)		(4,593	)		-			-			(3,109,522	)					(3,114,115	)
Stock based compensation
- Clinical and Advisory Board														321,634						321,634
- Employees and Directors														462,156						462,156
- Executives														7,173,547						7,173,547
Net loss for the period																	(55,400,890	)		(55,400,890	)
Balance as of June 30, 2007		30,482,351		$	30,482			-			-		$	20,421,056		$	(63,648,159	)	$	(43,196,621	)
Shares issued as part of convertible promissory notes extension agreement (July 2007)		311,522			312									622,042						622,354
Shares issued upon conversion of convertible promissory notes and accrued interest (July 2007)		18,240			18									31,715						31,733
Shares issued as part of convertible promissory notes extension agreement (November 2007)		30,000			30									11,070						11,100
Shares issued as part of a consulting agreement (December 2007)		50,000			50									119,950						120,000
Shares exchanged as part of convertible promissory notes extension agreement (February 2008)		(30,000	)		(30	)								(23,370	)					(23,400	)
Shares reissued for issuance of convertible promissory note		(18,240	)		(18	)								(31,715	)					(31,733	)
Stock based compensation
- Clinical and Advisory Board														130,660						130,660
- Employees and Directors														736,370						736,370
Net income for the period																	19,625,103			19,625,103
Balance as of June 30, 2008		30,843,873		$	30,844								$	22,017,778		$	(44,023,056	)	$	(21,974,434	)
Stock based compensation
- Clinical and Advisory Board														23,038						23,038
- Extension of Director options														96,001						96,001
- Employees and Directors														351,768						351,768
Net income for the period																	1,846,763			1,846,763
Balance as of June 30, 2009		30,843,873		$	30,844								$	22,488,585		$	(42,176,294	)	$	(19,656,864	)

See notes to consolidated financial statements

48

Intellect Neurosciences Inc. and Subsidiary

(a development stage company)

Consolidated Condensed Statements of Cash Flows

	Year Ended
	June 30,
	2009			2008			April 25, 2005 (inception) through June 30, 2009
Cashflows from operating activities:
Net income	$	1,846,763		$	19,625,103		$	(42,176,293	)
Adjustments to reconcile net (loss) to net cash used by operating activities:
Depreciation and amortization		212,333			238,951			674,009
Amoritization of financing costs		10,444			1,455,274			2,384,727
Accretion of discount on note receivable		-						-
Change in unrealized loss of derivative instruments		(3,403,737	)		(33,648,202	)		(13,809,198	)
Stock based compensation		470,807			867,030			9,502,930
Interest expense related to warrants		-			214,879			1,129,126
Investments written off		-						150,000
Shares issued in connection with merger		-						7,020,000
Shares issued for note extensions and compensation		-			753,453			753,453
Conversion of common stock to new Series B preferred shares		-						6,606,532
Accretion of debt discount		38,970			2,816,177			3,382,562
Interest expense related to Series B dividends		488,974			490,312			1,366,390
Amortization of deferred costs		(1,000,000	)
Disposition of fixed assets					43,412			43,412
Loss on sale of fixed assets		27,544			151,972			179,516
		-
Changes in:		-
(Increase) decrease in prepaid expenses and other assets		6,089			52,971			(14,488	)
(Increase) decrease in accounts receivable		(9,338	)					(6,964	)
Increase in accrued interest		1,058,628			798,121			2,189,546
Increase (decrease)  in accounts payable and accrued expenses		(432,024	)		1,394,007			4,192,007
Increase (decrease) in deferred lease liability		(6,123	)		(1,795	)		11,488
Increase (decrease) in other long term liabilities		(46,049	)		(60,213	)		-
Deferred credit					1,000,000			-
Net cash used by operating activities:		(736,719	)		(3,808,548	)		(16,421,245	)
Cashflows from investing activities:
Security deposit		7,612			96,630			(70,649	)
Acquistion of property and equipment		(12,619	)		(21,791	)		(1,059,699	)
Restricted cash		34,056			20,791			-
Investment in Ceptor		-						(150,000	)
					-
Net cash provided by investing activities:		29,049			95,630			(1,280,348	)
Cashflows from financing activities:
Borrowings from stockholders		485,000			3,338,828			5,479,828
Proceeds from sale of common stock		-						21,353
Proceeds from sale of preferred stock		-						6,761,150
Preferred stock issuance costs		-						(814,550	)
Proceeds from sale of Convertible Promissory Notes		843,500			825,000			10,021,500
Repayment of borrowings from stockholder		(135,000	)		(894,000	)		(1,706,000	)
Convertible Promissory Notes issuance cost		-						(466,100	)
Repayment of borrowings from noteholders		(426,000	)		(249,000	)		(1,325,000	)
Warrants issued for extensions		-			-			-
Net cash provided by financing activities:		767,500			3,020,828			17,972,181
Net increase in cash and cash equivalents		59,830			(692,090	)		270,588
Cash and cash equivalents beginning of period		210,758			902,848			-
Cash and cash equivalents end of period	$	270,588		$	210,758		$	270,588
Supplemental disclosure of cash flow informations:
Cash paid during the period for:
Interest	$	-		$	31,583		$	71,737
Non-cash investing and financing tranactions:
Common Stock Subscription Receivable								-
Conversion of Convertible Notes payable and accrued interest					-
into Series B preferred stock
Conversion of Series B preferred into common								3,114,115
Conversion of Series A preferred into common								198,868
Accrued dividend on Series B prefs treated as capital contribution								387,104
Exchange of common stock for note					23,400			23,400

See notes to consolidated financial statements

49

Note 1. Nature of Operations and Basis of Presentation

Nature of Operations and Liquidity

Intellect Neurosciences, Inc. a Delaware corporation, (“Intellect”, “our”, “us”, “we” or the “Company” refer to Intellect Neurosciences, Inc. and its subsidiaries) is a biopharmaceutical company, which together with its subsidiaries Intellect Neurosciences, USA, Inc. (“Intellect USA”) and Intellect Neurosciences, (Israel) Ltd. (“Intellect Israel”), is conducting research and developing proprietary drug candidates to treat Alzheimer’s disease (“AD”) and other diseases associated with oxidative stress. In addition, we have developed and are advancing a patent portfolio related to specific therapeutic approaches for treating AD. Since inception of Intellect USA in 2005, we have devoted substantially all of our efforts and resources to research and development activities. We operate under a single segment. Our fiscal year end is June 30.  We have no product sales through June 30, 2009. Our losses from operations have been funded primarily with the proceeds of equity and debt financings and the receipt of fees from licensing agreements.

As of June 30, 2009 and 2008, we had approximately $271,000 and $210,000, respectively, in cash and investments, a capital deficit of approximately $19.7 and $22 million, respectively, and a deficit accumulated during the development stage of our Company of approximately $42.2 and $44 million, respectively. Our net income/loss before other income/ (expense) from operations for the fiscal years ended June 30, 2009 and 2008 was approximately $0.3 million net income and $7.3 million net loss, respectively.  We anticipate that our existing capital resources will not enable us to continue operations past mid October 2009, or earlier if unforeseen events or circumstances arise that negatively affect our liquidity. These conditions raise substantial doubt about our ability to continue as a going concern. If we fail to raise additional capital or obtain substantial cash inflows from potential partners or investors prior to mid October 2009, we may be forced to cease operations.

As described more fully below in Note 7, Convertible Promissory Notes Payable, we were in default on convertible promissory notes with an aggregate carrying value of $5.3 and $5.6 million as of June 30, 2009 and 2008, respectively. On October 21, 2008, one of our note holders filed a complaint in the United States District Court of the Southern District of New York claiming that approximately $541,000 of principal and accrued interest was past due and that he was entitled to a money judgment against us for all amounts due under the note, plus attorney’s fees, costs and disbursements.  The matter was settled on April 22, 2009 and the note holder released the Company from all of the claims set forth above.  In connection with the settlement, Margie Chassman, one of our principal shareholders, purchased the note from the note holder and agreed to cancel it. In exchange, we issued Ms. Chassman an additional Senior Note Payable (as defined in Note 7, Convertible Promissory Notes Payable) with a face amount of $310,000 and repaid $100,000 of Notes held by Ms. Chassman. We did not issue any additional warrants to Ms. Chassman.

As described more fully below in Note 5, Material Agreements, we are in default with respect to certain payment obligations arising from various research agreements. We are in default with respect to $100,000 in license payments and $50,000 in research payments owed to New York University (NYU) under our Option Agreement with NYU for an option to license certain NYU inventions and know-how relating to a vaccine for the mitigation, prophylaxis or treatment of AD (the “Beta-Vax Agreement”). As a result of the payment delinquencies and a decision by Intellect’s management to focus on its core programs, Intellect agreed with NYU on December 24, 2008 to the cancellation of the Beta-Vax Agreement, resulting in the termination of the license from NYU to Intellect.

We have taken actions to reduce the rate of our cash burn and preserve our existing cash resources. We have sublet approximately 75% of our office space at our New York City office facility, closed our research laboratory in Israel and terminated employees both in Israel and New York. The lease is held by our wholly-owned subsidiary, Intellect Israel.  We are in the process of reaching an agreement with the landlord of the Israeli facility pursuant to which the lease will be terminated in exchange for surrender of amounts available under certain lease guarantees and an agreement by Intellect Israel to pay the landlord certain costs related to rewiring the facility, estimated at approximately $12,000.  We will continue to conduct research through outsourced facilities and arrangements. Currently, we have a total of three employees.

We are seeking additional funding through various financing alternatives. If additional capital is raised through the sale of equity or convertible debt securities, the issuance of such securities will result in dilution to our existing stockholders. We cannot assure you that financing will be available on favorable terms or at all.

50

We are a development stage company and our core business strategy is to leverage our intellectual property estate through license arrangements and to develop our proprietary compounds that we have purchased, developed internally or in-licensed from universities and others, through human proof of concept (Phase II) studies or earlier if appropriate and then seek to enter into collaboration agreements, licenses or sales to complete product development and commercialize the resulting drug products. Our objective is to obtain revenues from licensing fees, milestone payments, development fees and royalties related to the use of our intellectual property estate and the use of our proprietary compounds for specific therapeutic indications or applications.  As of June 30, 2009, we had no products approved for sale by the U.S. Food and Drug Administration (“FDA”). There can be no assurance that our research and development efforts will be successful, that any products developed by us or any of our future partners will obtain necessary government regulatory approval or that any approved products will be commercially viable. In addition, we operate in an environment of rapid change in technology and are dependent upon the continued services of our current employees, consultants and subcontractors.

Our lead immunotherapy drug candidate is IN-N01, a monoclonal antibody that has completed the humanization process. Our drug candidate that is most advanced in clinical trials is OXIGON, a chemically synthesized form of a small, dual mode of action, naturally occurring molecule.  We commenced human Phase I clinical trials for OXIGON on June 1, 2005 in the Netherlands and completed Phase I clinical trials on November 15, 2006.

Intellect USA was incorporated on April 25, 2005 under the name Eidetic Biosciences, Inc. It changed its name to Mindset Neurosciences, Inc. on April 28, 2005, to Lucid Neurosciences, Inc. on May 17, 2005 and finally to Intellect Neurosciences, Inc. on May 20, 2005.  Intellect Israel was incorporated in Israel as a private limited company in July 2005 for the purpose of conducting research relating to our proprietary compounds. Currently, Intellect Israel is dormant and we conduct our research activities through third party outsourcing arrangements.

Reverse Merger

On January 25, 2007, GlobePan Resources, Inc. entered into an agreement and plan of merger with Intellect Neurosciences, Inc., a privately held Delaware corporation, and INS Acquisition, Inc., a newly formed, wholly-owned Delaware subsidiary of GlobePan Resources, Inc. which we refer to as Acquisition Sub. Pursuant to this agreement and plan of merger, on January 25, 2007, Acquisition Sub merged with and into Intellect Neurosciences, Inc., Acquisition Sub ceased to exist and Intellect Neurosciences, Inc. survived the merger and became the wholly-owned subsidiary of GlobePan Resources, Inc. We refer to this transaction as the merger. Intellect Neurosciences, Inc., the surviving entity in the merger, then changed its name to Intellect USA, Inc. and GlobePan Resources, Inc. changed its name to Intellect Neurosciences, Inc. Therefore, as of January 26, 2007, our name is Intellect Neurosciences, Inc. and the name of our wholly-owned subsidiary is Intellect USA, Inc., which wholly-owns Intellect Neurosciences (Israel) Ltd., an Israeli company. We refer to Intellect USA, Inc. as Intellect USA and we refer to Intellect Neurosciences (Israel) Ltd. as Intellect Israel.

Following the merger and after giving effect to the options we issued immediately following the merger, there were 35,075,442 shares of our common stock issued and outstanding on an actual basis and 55,244,385 shares of our common stock issued and outstanding on a fully diluted basis. In our determination of the number of shares of our common stock issued and outstanding on a fully diluted basis, we (i) include the aggregate 9,000,000 shares of our common stock retained by existing GlobePan stockholders, (ii) include the aggregate 26,075,442 shares of our common stock received by former holders of Intellect USA capital stock, including the former holders of Intellect USA’s Series B Preferred stock, (iii) assume the issuance of all shares potentially available for issuance under our 2005 plan and our 2006 plan, regardless of whether such shares are currently covered by options, and (iv) assume the conversion of all outstanding warrants and convertible notes and convertible preferred stock into shares of our common stock.

In connection with the merger, we reflected a charge for the fiscal year ended June 30, 2007 in the amount of $7,020,000, representing the shares issued to the GlobePan shareholders. We incurred this charge due to the fact that the GlobePan shareholders obtained shares of the shell company prior to the reverse merger date.

Following the merger, we exchanged the shares of our common stock received by the former holders of Intellect USA’s Series B Preferred stock in the merger for shares of a new series of our preferred stock. The new Series B Preferred stock has the same designations, preferences, special rights and qualifications, limitations and restrictions with respect to our capital stock as the designations, preferences, special rights and qualifications, limitations and restrictions that the Intellect USA Series B Preferred stock had with respect to Intellect USA’s capital stock. (See Note 8)

51

Basis of Presentation

These consolidated financial statements are presented on the basis that we will continue as a going concern.  The going concern concept contemplates the realization of assets and satisfaction of liabilities in the normal course of business over a reasonable length of time.  Due to the start up nature of our activities, we have incurred significant operating losses since inception.  As a result, we have generated negative cash flows from operations, and have an accumulated deficit at June 30, 2009 and 2008 of $42,176,294 and $44,023,056, respectively,  and are in default on certain obligations. We have limited capital resources and operations since inception have been funded with the proceeds from private equity and debt financings and license fee arrangements.  We anticipate that our existing capital resources will not enable us to continue operations past mid October of 2009, or earlier if unforeseen events or circumstances arise that negatively affect our liquidity. These conditions raise substantial doubt about our ability to continue as a going concern. We are seeking additional funding through various financing alternatives. If we fail to raise additional capital or obtain substantial cash inflows from potential partners prior to mid-October 2009, we may be forced to cease operations. The consolidated financial statements do not include any adjustments that might result from the outcome of this going concern uncertainty.

Note 2. Summary of Significant Accounting Policies

Principles of Consolidation. The consolidated financial statements include the accounts of our wholly owned subsidiary, Intellect Israel and the accounts of Mindgenix, Inc. (“Mindgenix”), a wholly-owned subsidiary of Mindset Biopharmaceuticals, Inc. (“Mindset”). We consolidate Mindgenix because we have agreed to absorb certain costs and expenses incurred that are attributable to its research. Dr. Chain, our CEO, is a controlling shareholder of Mindset and the President of Mindgenix. All inter-company transactions have been eliminated in consolidation.

Use of Estimates.The preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States involves the use of estimates and assumptions that affect the recorded amounts of assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.  Significant estimates include the fair value of derivative instruments, including stock options and warrants to purchase our common stock, recognition of clinical trial costs, certain consulting expenses and deferred taxes.  Actual results may differ substantially from these estimates.

Cash and Cash Equivalents.  Cash and cash equivalents includes all highly liquid, interest-bearing instruments with maturity of three months or less when purchased.  Cash and cash equivalents may include demand deposits held in banks and interest bearing money market funds.

Restricted Cash. Restricted cash at June 30, 2009 was zero and at June 30, 2008 it was approximately $34,000. This amount was set aside for severance payments to employees in Israel.

Research and Development Costs and Clinical Trial Expenses.Research and development costs include costs directly attributable to the conduct of research and development programs, including the cost of salaries, payroll taxes, employee benefits, materials, supplies, maintenance of research equipment, costs related to research collaboration and licensing agreements, the cost of services provided by outside contractors, including services related to our clinical trials, clinical trial expenses, the full cost of manufacturing drugs for use in research, preclinical development, and clinical trials. All costs associated with research and development are expensed as incurred.

Clinical research expenses include obligations resulting from our contracts with various research organizations in connection with conducting clinical trials for our product candidates. We account for those expenses on an accrual basis according to the timeline and payment schedule defined in the contract.

Fixed assets.Fixed assets are stated at cost less accumulated depreciation.  To the extent laboratory equipment has alternative uses, it has been capitalized.  Depreciation and amortization are provided for on a straight-line basis over the estimated useful life of the asset. Leasehold improvements are amortized over the life of the lease or of the improvements, whichever is shorter. Expenditures for maintenance and repairs that do not materially extend the useful lives of the respective assets are charged to expense as incurred. The cost and accumulated depreciation or amortization of assets retired or sold is removed from the respective accounts and any gain or loss is recognized in operations. Fixed assets held for resale as a result of the closing of our research laboratory in Israel are reflected at fair value.

Long-Lived Assets. We assess the recoverability of the carrying value of our long-lived assets, whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. We evaluate the recoverability of such assets based upon the expectations of undiscounted cash flows from such assets. If the sum of the expected future undiscounted cash flows were less than the carrying amount of the asset, a loss would be recognized for the difference between the fair value and the carrying amount.

Foreign currency translation and foreign assets.In accordance with Statement of Financial Accounting Standards No. 52, "Foreign Currency Translation" ("SFAS 52"), assets and liabilities of our foreign subsidiary are translated into United States dollars at the exchange rates in effect on the reporting date.  Income and expenses are translated at actual exchange rates at the time of the transaction.  Our foreign subsidiary is not a self-contained entity and utilizes the United States dollar as its functional currency. The resulting transaction gains and losses are reflected in earnings.

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Fair value of financial instruments. The carrying amount reported in the balance sheet for cash and cash equivalents, convertible promissory notes, accounts payable, and accrued expenses approximates fair value due to the short-term nature of the accounts.

Concentration of credit risk.  Financial instruments that potentially subject us to concentrations of credit risk primarily consist of cash equivalents.  We attempt to invest excess funds in accordance with a policy objective seeking to preserve both liquidity and safety of principal. We generally invest our excess funds in short term money market accounts at high credit quality financial institutions.

Deferred financing costs. Deferred financing costs attributable to the issuance of convertible promissory notes and other instruments have been amortized to interest expense over the term of the notes.

Deferred Lease Liability. The lease on our New York facility provides for escalations of the minimum rent during the lease term, as well as additional rent based upon increases in real estate taxes and common maintenance charges. We record rent expense from leases with escalations using the straight-line method, thereby prorating the total rental commitment over the term of the lease. Under this method, the deferred lease liability represents the difference between the minimum cash rental payments and the rent expense computed on a straight-line basis.

Income taxes. Deferred tax liabilities and assets are recognized for the expected future tax consequences of events that have been included in the financial statements or tax returns. These liabilities and assets are determined based on differences between the financial reporting and tax basis of assets and liabilities measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is recognized to reduce deferred tax assets to the amount that is more likely than not to be realized. In assessing the likelihood of realization, we consider estimates of future taxable income.

Derivative Instruments.We have issued and outstanding certain instruments with embedded derivative features which we analyze in accordance with the pronouncements relating to accounting for derivative instruments and hedging activities to determine if these instruments are derivatives or have embedded derivatives that must be bifurcated.  Under the applicable accounting literature, the estimated value of the embedded derivative, if any, is bifurcated from its host instrument on the date of sale or issuance of the securities or debt based on a valuation utilizing the appropriate valuation model.  The embedded derivative liability is classified as such and is marked-to-market and adjusted to fair value at each reporting date and the change in fair value is recorded to other (income) expense, net.  In addition, freestanding warrants are accounted for as equity securities or liabilities in accordance with the provisions of the applicable accounting literature.  As the conversion rate or exercise price of all outstanding instruments vary with the fair value of our common stock, they are recorded as an obligation at fair value, marked-to-market at each reporting date, and carried on a separate line of the accompanying balance sheet.  If there is more than one embedded derivative, their value is considered in the aggregate.

Stock based compensation.   As of January 1, 2006, we adopted SFAS 123(R), "Share-Based Payment", which establishes standards for share-based transactions in which an entity receives employee's services for equity instruments of the entity, such as stock options, or liabilities that are based on the fair value of the entity's equity instruments or that may be settled by the issuance of such equity instruments.  SFAS 123(R) supersedes the option of accounting for share-based compensation transactions using APB Opinion No. 25, "Accounting for Stock Issued to Employees", and requires that companies expense the fair value of stock options and similar awards, as measured on the awards' grant date, date of adoption, and to awards modified, repurchased or cancelled after that date.

Revenue recognition. We recognize revenue in accordance with Staff Accounting Bulletin No. 104, “Revenue Recognition” (“SAB 104”), Financial Accounting Standards Board (“FASB”') and Emerging Issues Task Force No. 00-21 “Accounting for Revenue Arrangements with Multiple Deliverables” (“EITF 00-21”). Non-refundable upfront and research and development milestone payments and payments for services are recognized as revenue as the related services are performed over the term of the collaboration.

New Accounting Pronouncements

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, which is effective for fiscal years beginning after November 15, 2007. SFAS No. 159 also amends certain provisions of SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities. This statement permits entities to choose to measure many financial instruments and certain other items at fair value.  We do not expect our adoption of SFAS No. 159 in fiscal year 2009 to have a material impact on our results of operations or financial position.

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In April 2007, the FASB issued FSP FIN 39-1, which amends FASB Interpretation (“FIN”) No. 39, "Offsetting of Amounts Related to Certain Contracts ” (“FIN 39”), to permit a reporting entity that is party to a master netting arrangement to offset the fair value amounts recognized for the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) against fair value amounts recognized for derivative instruments that have been offset under the same master netting arrangement in accordance with FIN 39. FSP FIN 39-1 was effective for fiscal years beginning after November 15, 2007. The adoption of FSP FIN 39-1 on July 1, 2008 is not expected to have an impact on the Company’s results of operations or financial condition.

In May 2007, the FASB issued FASB Staff Position (“FSP”) FIN No. 48-1, Definition of Settlement in FASB Interpretation No. 48. FSP FIN No. 48-1 provides guidance on how to determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits. FSP FIN No. 48-1 is effective retroactively to April 28, 2007. The adoption of this standard did not have a significant impact on the Company’s consolidated financial position or results of operations.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), "Business Combinations" ("SFAS No. 141(R)"). SFAS No. 141(R) replaces SFAS No. 141, "Business Combinations," however, it retains the fundamental requirements of the former Statement that the acquisition method of accounting (previously referred to as the purchase method) be used for all business combinations and for an acquirer to be identified for each business. SFAS No. 141(R) defines the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as the date that the acquirer achieves control. Among other requirements, SFAS No. 141(R) requires the acquiring entity in a business combination to recognize the identifiable assets acquired, liabilities assumed and any non-controlling interest in the acquiree at their acquisition-date fair values, with limited exceptions; acquisition-related costs generally will be expensed as incurred. SFAS No. 141(R) requires certain financial statement disclosures to enable users to evaluate and understand the nature and financial effects of the business combination. SFAS No. 141(R) must be applied prospectively to business combinations that are consummated beginning in the Company's fiscal 2010. The Company's adoption of SFAS No. 141(R) is not expected to have a material effect on its consolidated financial statements.

In December 2007, the U.S. Securities and Exchange Commission issued Staff Accounting Bulletin No. 110 ("SAB 110"). This staff accounting bulletin ("SAB") expresses the views of the staff regarding the use of a "simplified" method, as discussed in SAB No. 107 ("SAB 107"), in developing an estimate of expected term of "plain vanilla" share options in accordance with SFAS No. 123 (revised 2004), Share-Based Payment. In particular, the staff indicated in SAB 107 that it will accept a company's election to use the simplified method, regardless of whether the company has sufficient information to make more refined estimates of expected term. At the time SAB 107 was issued, the staff believed that more detailed external information about employee exercise behavior (e.g., employee exercise patterns by industry and/or other categories of companies) would, over time, become readily available to companies. Therefore, the staff stated in SAB 107 that it would not expect a company to use the simplified method for share option grants after December 31, 2007. The staff understands that such detailed information about employee exercise behavior may not be widely available by December 31, 2007. Accordingly, the staff will continue to accept, under certain circumstances, the use of the simplified method beyond December 31, 2007. The Company's adoption of SAB 111 is not expected to have a material effect on its consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements” (“SFAS No. 160”). This Statement amends Accounting Research Bulletin (ARB) No. 51 to establish accounting and reporting standards for the non-controlling (minority) interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a non-controlling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements will have no impact. SFAS No. 160 is effective for the Company’s fiscal year beginning July 1, 2009. Management has determined that the adoption of this standard will not have an impact on the Company’s financial statements.

In February 2008, the FASB issued FSP No. FAS 157-2, "Effective Date of FASB Statement No. 157". This FSP delays the effective date of SFAS No. 157, "Fair Value Measurements", for non-financial assets and non-financial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). This FSP defers the effective date of SFAS No. 157 to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years for items within the scope of this FSP.

In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities - an amendment of FASB Statement No. 133. This statement changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity's financial position, financial performance, and cash flows. SFAS No. 161 is effective for fiscal years and interim periods beginning after November 15, 2008. The Company's adoption of SFAS No. 161 is not expected to have a material effect on its condensed consolidated financial statements.

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In April 2008, the FASB issued FASB Staff Position SOP 90-7-1, An Amendment of AICPA Statement of Position 90-7 (“FSP SOP 90-7-1”). FSP SOP 90-7-1 resolves the conflict between the guidance requiring early adoption of new accounting standards for entities required to follow fresh-start reporting under American Institute of Certified Public Accountants Statement of Position 90-7, Financial Reporting by Entities in Reorganization under the Bankruptcy Code, and other authoritative accounting standards that expressly prohibit early adoption. Specifically, FSP SOP 90-7-1 will require an entity emerging from bankruptcy that applies fresh-start reporting to follow only the accounting standards in effect at the date fresh-start reporting is adopted, which include those standards eligible for early adoption if an election is made to adopt early. Management has elected to only adopt new accounting standards in effect at the date fresh-start reporting is adopted and to not early adopt standards eligible for early adoption.

In May 2008, the FASB issued Staff Position No. APB 14-1, Accounting for Convertible Debt Instruments that may be Settled in Cash upon Conversion (Including Partial Cash Settlement), (the “FSP”). The adoption of this FSP will affect the accounting for convertible and exchangeable notes and convertible preferred units. The FSP requires the initial proceeds from the sale of our convertible and exchangeable senior notes and convertible preferred units to be allocated between a liability component and an equity component. The resulting discount will be amortized using the effective interest method over the period the debt is expected to remain outstanding as additional interest expense. The FSP is effective for our fiscal year beginning on July 1, 2008 and requires retroactive application. The Company is currently evaluating the impact that this will have on the Company’s results of operations or financial condition.

In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles". This Statement identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States (the GAAP hierarchy). This Statement is effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. The Board does not expect that this Statement will result in a change in current practice. However, transition provisions have been provided in the unusual circumstance that the application of the provisions of this Statement results in a change in practice.

In June 2008, the FASB issued FSP EITF 03-6-1, which addresses whether instruments granted in equity-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing basic earnings per unit under the two-class method prescribed by SFAS 128. FSP EITF 03-6-1 is retrospectively effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years, with early application prohibited. The Company is evaluating the impact the adoption of FSP EITF 03-6-1 will have on its earnings per share calculations.

Note 3. Asset Transfer Agreement

Effective June 23, 2005, Intellect USA entered into an agreement (the "Asset Transfer Agreement") with Mindset Biopharmaceuticals, Inc. ("Mindset") to acquire certain intellectual property related assets (the "Mindset Assets"), including certain related patents, patent applications, trademarks, licenses, know-how, inventions and certain inventories from Mindset (the "2005 Asset Transfer").

Pursuant to the Asset Transfer Agreement, Mindset sold, assigned, conveyed and transferred to Intellect USA the Mindset Assets. As consideration for the Mindset Assets, Intellect USA agreed to the following:

· To purchase certain trade debt owed by Mindset to third parties in the face amount of approximately $1,277,438 (the "Annex I Debt");

· To reduce the Annex I Debt that would be owed by Mindset to Intellect USA by 30%, subject to further reduction or elimination under certain circumstances, and to extend Mindset's obligation to pay the remaining balance of such debt until June 23, 2008 (the "Mindset Maturity Date"), subject to acceleration or further deferral under certain events;

· Subject to satisfaction of certain condition precedents, to acquire certain debt owed by Mindset to Mindset Biopharmaceuticals Ltd. ("Mindset Ltd."), a wholly-owned subsidiary of Mindset, in the principal amount of $743,282 (the "Annex II Debt");

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· To reduce the Annex II debt that would be owed by Mindset to Intellect USA by 50%, and to defer Mindset's obligation to pay the remaining balance of such claims until the Mindset Maturity Date;

· To purchase certain claims held by certain of our officers/shareholders aggregating $1,634,000 (the "Annex III Debt") and to defer Mindset's obligation to pay such claims until the Mindset Maturity Date;

· To assume certain trade and other debt owed by Mindset to third parties in the aggregate amount of approximately $1,623,730 (the "Annex IV Debt");

· To assume certain obligations of Mindset amounting to approximately $60,405 (the "Annex V Debt") related to certain research and development costs previously incurred by Mindset; and

· To assume the obligations of Mindset under certain licenses that would be assigned to Intellect USA pursuant to the 2005 Asset Transfer.

As of June 30, 2006, Intellect USA acquired the Annex I and Annex III Debt (collectively, the "Purchased Debt") for approximately $385,181. Collection of amounts owed under the Purchased Debt is highly unlikely due to the financial condition of Mindset, and as of June 30, 2006, such amounts had a fair value of $0. Therefore, the payments for the Purchased Debt aggregating $385,181 are accounted for as a cost of acquiring the research and development related intellectual assets of Mindset and are included in research and development costs for the period ended June 30, 2006. Also during the year ended June 30 2006, Intellect USA paid $60,405 in full satisfaction of the Annex V Debt. Such payments have been included in research and development expenses for the year ended June 30, 2006.

During the year ended June 30, 2006, pursuant to the Asset Transfer Agreement, Intellect USA entered into a separate agreement with the trustee in bankruptcy for Mindset Limited to acquire the Annex II Debt (amounting to approximately $743,282) for a total payment of $150,000 payable in two semi-annual installments. Such payment has been included in research and development expenses. Intellect USA paid $75,000 of the liability and $14,000 of legal fees in the year ended June 30, 2006 and paid the remainder of the liability of $75,000 in the year ended June 30, 2007.

Intellect USA settled the Annex IV Debt of $1,623,730 for $248,314, including $193,299 due as described below, except for certain claims owed to Goulston & Storrs, LLP in the amount of $192,095 which was settled in June 2005 through the issuance of a warrant for 100,000 shares of Intellect USA common stock at an exercise price of $0.001 per share (See Note 11, Capital Deficiency). Goulston & Storrs exercised the warrant in April 2006 and received the underlying shares, which subsequently were exchanged for shares of our common stock in the merger. Such settlements have been treated as research and development expenses in the respective period.

In January 2006, Intellect USA entered into a Letter Agreement, Assignment of Claim Agreement and Subscription Agreement with the Institute for the Study of Aging (the “ISOA”). Pursuant to these agreements, the ISOA agreed to settle the Annex IV Debt of $570,000 in exchange for (a) $193,299 payable in three equal installments of $64,433 on January 31, 2006, April 28, 2006 and July 28, 2006, (b) the issuance of 2,225 shares of Series A Convertible Preferred Stock (see Note 11, Capital Deficiency) and (c) Intellect USA’s agreement to pay a total of $225,500 of milestone payments contingent upon clinical development of OXIGON. The Series A Convertible Preferred Stock was exchanged for shares of our common stock in the merger.

As a result of the transactions described above, we are currently a significant creditor of Mindset. Mindset’s current business plan is to provide transgenic mice for Alzheimer’s disease research through its existing subsidiary, Mindgenix, Inc. Although it is possible that Mindset will become a profitable entity in the future, we believe that we are unlikely to recover any significant repayment of amounts due to us from Mindset. Under the Asset Transfer Agreement, in the event of certain acceleration events, such as the liquidation, dissolution or institution against or by Mindset of bankruptcy proceedings, approximately $2.9 million of Mindset debt owed to us will become immediately due. If no such acceleration event has occurred on or before December 31, 2013, then the $2.9 million of Mindset debt will be extinguished. No such bankruptcy proceedings have been instituted by or against Mindset as of the date of this report and we have no basis to assume that any such proceedings are likely to occur in the foreseeable future.

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Note 4. Fixed Assets

Fixed assets consist of the following:

	June 30, 2009			June 30, 2008
Furniture, fixtures and office equipment	$	196,730		$	214,614
Laboratory Equipment		-			-
Leasehold Improvements		542,066			542,066
Less accumulated depreciation		(576,035	)		(388,718	)
Total	$	162,760		$	367,962

Depreciation expense amounted to $212,333 and $238,951 for the years ended June 30, 2009 and June 30, 2008, respectively.

Note 5.  Material Agreements

South Alabama Medical Science Foundation Research and License Agreement. Effective August 10, 1998 and as amended as of September 1, 2002, Mindset entered into a Research and License Agreement with the South Alabama Medical Science Foundation (the "SAMS Foundation").  On June 17, 2005, SAMS Foundation consented to Mindset's assignment of the Research and License Agreement to Intellect USA.  Under the Research and License Agreement, we have an exclusive, worldwide, royalty-bearing license, with the right to grant sublicenses, under certain patents and know-how relating to the use of melatonin and melatonin analogs in the prevention or treatment of amyloid-related disorders and in the use of melatonin analogs as antioxidants and to the use of indole-3-propionic acid to prevent a cytotoxic effect of amyloid-beta protein to treat a fibrillogenic disease, including AD, or generally to treat a disease or condition where free radicals and/or oxidative stress contribute to pathogenesis.  Under the Research and License Agreement, we have the first right to enforce the underlying intellectual property against unauthorized third parties. We are obligated to make future payments to the SAMS Foundation totaling approximately $1,500,000 upon achievement of certain milestones based on phases of clinical development and approval of the FDA (or foreign equivalent) and also to pay the SAMS Foundation a royalty on the sales, net of various customary deductible items, subject to certain minimum royalties, attributable to each product utilizing the licensed technology. We have yet to achieve the clinical development or FDA approval milestones that trigger our obligation to make future payments.

Under the September 2002 amendment to the Research and License Agreement, the initiation of a Phase I trial of an AD licensed product anywhere in the world triggered a milestone payment obligation of $50,000. On December 1, 2005, Intellect USA commenced a Phase I trial for OXIGON in The Netherlands and thus triggered this payment obligation. On January 11, 2006, the SAMS Foundation agreed to amend the Research and License Agreement to provide that the $50,000 milestone payment would be payable in five equal monthly installments of $10,000, the first of which was payable on February 1, 2006. Intellect USA paid the $50,000 to the SAMS Foundation during the year ended June 30, 2006 in monthly installments when due.

New York University Research and License Agreement. Effective August 10, 1998 and as amended in 2002, Mindset entered into a license agreement with New York University ("NYU") with terms similar to the terms described above with respect to the research and License Agreement with the SAMS Foundation.  On June 17, 2005, NYU consented to Mindset's assignment of the license agreement with NYU to Intellect USA.  Under the license agreement with NYU, we have an exclusive, worldwide, royalty-bearing license, with the right to grant sublicenses, under certain patents and know-how relating to the use of melatonin and melatonin analogs in the prevention or treatment of amyloid-related disorders and in the use of melatonin analogs as antioxidants and to the use of indole-3-propionic acid to prevent a cytotoxic effect of amyloid-beta protein, treat a fibrillogenic disease, including AD, or generally to treat a disease or condition where free radicals and/or oxidative stress contribute to pathogenesis.  In addition, we have the first right to enforce the underlying intellectual property against unauthorized third parties.  We are obligated to make future payments totaling approximately $1,500,000 upon achievement of certain milestones based on phases of clinical development and approval of the FDA (or foreign equivalent) and also to pay NYU a royalty on the sales, net of various customary discounts subject to certain minimum royalty payments, attributable to each product utilizing the licensed technology and a percentage of sales of sublicenses. We have yet to achieve the clinical development or FDA approval milestones that trigger our obligation to make future payments.

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Under the September 2002 amendment to the Research and License Agreement, the initiation of a Phase I trial of an AD licensed product anywhere in the world triggered a milestone payment obligation of $50,000. On December 1, 2005, Intellect USA commenced a Phase I trial for OXIGON in The Netherlands and thus triggered this payment obligation. On January 11, 2006, NYU agreed to amend the Research and License Agreement to provide that the $50,000 milestone payment would be payable in five equal monthly installments of $10,000, the first of which was payable on February 1, 2006. Intellect USA paid the $50,000 to NYU during the year ended June 30, 2006 in monthly installments when due.

New York University Option Agreement and License Agreement – BETAVAX (terminated).On August 31, 2005, Intellect USA entered into an Option Agreement with New York University for an option to license certain NYU inventions and know-how relating to a vaccine for the mitigation, prophylaxis or treatment of AD.  Under the Option Agreement, we were entitled to acquire an exclusive, worldwide license to commercially use NYU's inventions and know-how in the development of products for use in the mitigation, prophylaxis or treatment of AD.  NYU retained the right to use the inventions and know-how for its own academic and research purposes and to allow other academic institutions to use the inventions and know-how for their academic and research purposes other than clinical trials, as well as any rights of the United States government. In addition, we agreed to reimburse NYU for certain patent protection costs and expenses incurred by NYU. Patent costs are expensed as incurred to general and administrative costs.  Intellect USA exercised the option to acquire the license on April 1, 2006 and entered into a License Agreement with NYU on April 21, 2006.

Under the terms of the License Agreement, we were obligated to pay non-refundable, non-creditable license fees totaling $200,000, payable in five installments as follows: $25,000 on each of May 1 and June 1, 2006 and $50,000 payable on each of April 1, 2007, 2008 and 2009. We did not pay the license payments due on April 1, 2007 or April 1, 2008. The Agreement does not provide for interest payments; consequently, the principal payments have been discounted to their present value at an annual interest rate of 10%, resulting in a principal amount of approximately $172,700 and imputed interest of approximately $27,300 at the time of execution of the License Agreement. As of June 30, 2009, the approximate remaining balance due to NYU in respect of the License Agreement, including accrued interest is $145,260, which is included in Accounts Payable and Accrued Expenses as Due to Licensors on our Consolidated Balance Sheet.

In addition, we were obligated to pay NYU non-refundable research payments for performance by NYU of certain ongoing research activities totaling $200,000, payable in eight equal installments of $25,000 every three-months beginning on April 1, 2006. We paid $150,000 of such payments and are delinquent with respect to the balance. Also, we were obligated to make future payments totaling approximately $2,000,000 upon achievement of certain milestones based on phases of clinical development and approval of the FDA (or foreign equivalent) and also to pay NYU a royalty on the sales, net of various customary discounts, attributable to each licensed product. As a result of the payment delinquencies and a decision by Intellect’s management to focus on its core programs, Intellect agreed with NYU on December 24, 2008 to the cancellation of the Licensing Agreement, resulting in the termination of the license from NYU to Intellect. We remain obligated to pay NYU the outstanding amounts due under the License Agreement through the date of termination.

Mayo Foundation for Medical Education and Research License and Sponsored Research Agreement.Effective October 24, 1997 as amended on September 1, 2001 and on February 1, 2005, Mindset acquired from the Mayo Foundation for Medical Education and Research (“Mayo”) a non-exclusive license to use certain transgenic mice and related technologies as models for AD and other neurodegenerative diseases. Under the amended agreement with Mayo, Mindset is obligated to pay Mayo a royalty of 2.5 % of any net revenue that Mindset receives from the sale or licensing of a drug product for AD in which the Mayo transgenic mice were used for research purposes. The Mayo transgenic mice were used by the SAMS Foundation to conduct research with respect to OXIGON. Pursuant to the Consent to Assignment that Intellect USA executed with the SAMS Foundation in June 2005, Intellect USA agreed to assume all of Mindset’s obligations with respect to the License with the SAMS Foundation, which includes Mindset’s obligations to pay royalties to Mayo.Neither Mindset nor Intellect has received any net revenue that would trigger a payment obligation to Mayo.

Chimeric Peptide Assignment Agreement – RECALL-VAX. Effective as of June 6, 2000, Dr. Benjamin Chain assigned to Mindset all of his right, title and interest in certain of his inventions and patent applications related to the use of chimeric peptides for the treatment of AD. Dr. Benjamin Chain is the brother of our Chairman and Chief Executive Officer.  In exchange for such assignment, Mindset agreed to pay a royalty to Dr. Benjamin Chain equal to 1.5% of net sales of any drug products sold or licensed by Mindset utilizing the chimeric peptide technology. Intellect USA acquired these inventions and patent applications as part of the asset estate that we acquired from Mindset and we are obligated to make royalty payments to Dr. Benjamin Chain upon successful development of a drug utilizing this chimeric peptide technology. We have yet to develop any drug product that would trigger our obligation to make future payments to Dr. Benjamin Chain.

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Beta-Amyloid Specific, Humanized Monoclonal Antibody Purchase and Sale Agreement. Under the terms of a Beta-Amyloid Specific, Humanized Monoclonal Antibody Purchase and Sale Agreement (the "IBL Agreement") effective as of December 26, 2006 by and between Intellect USA and Immuno-Biological Laboratories Co., Ltd. ("IBL"), we acquired a beta amyloid specific monoclonal antibody ready for humanization, referred to as 82E1, including all lines and DNA sequences pertaining to it, and the IBL patents or applications relating to this antibody. We also acquired a second monoclonal antibody referred to as 1A10, the DNA sequence pertaining to it and the IBL patents or applications relating to this antibody. The Agreement requires an upfront payment of $50,000, which was subsequently reduced to $40,000, which we paid in March 2008.

In consideration for the purchase, we agreed to pay IBL a total of $2,125,000 (including the $50,000 referred to above) upon the achievement of certain milestones plus a specified royalty based on sales of any pharmaceutical product derived from the 82El or 1A10 antibodies. Also, we granted to IBL a worldwide, exclusive, paid-up license under certain Intellect granted patents and pending applications in Japan, to make, use and sell certain beta amyloid specific monoclonal antibodies solely for diagnostic and/or laboratory research purposes. The IBL Agreement expires upon the last to expire of the relevant Intellect patents, unless earlier terminated as the result of a material breach by or certain bankruptcy related events of either party to the agreement.

MRCT Research Collaboration Agreement. Effective as of August 6, 2007 and as amended on June 19, 2008, MRCT and Intellect entered into a Research Collaboration Agreement (the “Collaboration Agreement”) pursuant to which MRCT agreed to conduct a project to humanize 82E1, our beta-amyloid specific, monoclonal antibody for the treatment of Alzheimer’s disease. Humanization is an essential step in making antibodies safe for use in humans.

Under the terms of the Collaboration Agreement as amended, we are obligated to pay MRCT a total of $200,000 of up-front fees and $560,000 of research milestone payments related to the development of the 82E1 humanized antibody and additional commercialization milestones and sales based royalties related to the resulting drug products. As of June 30, 2009 and 2008, we have paid to MRCT a total of $200,000 and $100,000, respectively, of up-front fees, and none of the research milestones. Under the June 19, 2008 amendment, we may deliver warrants to purchase our common stock in lieu of cash payments under certain circumstances related to our future financing activities as payment for the $560,000 research milestone payment obligations. Three of the five research milestones have been achieved and as a result, a liabilityof $350, 000 reflecting research milestone payment obligations outstanding is included in Accounts Payable and Accrued Expenses.

Élan Pharma International Limited and Wyeth License Agreement – ANTISENILIN. In May, 2008, we entered into a License Agreement (the “Agreement”) by and among Intellect and AHP Manufacturing BV, acting through its Wyeth Medica Ireland Branch, (“Wyeth”) and Elan Pharma International Limited (“Elan”) to provide Wyeth and Elan (collectively, the “Licensees”) with certain license rights under certain of our patents and patent applications (the “Licensed Patents”) relating to certain antibodies that may serve as potential therapeutic products for the treatment for Alzheimer’s Disease (the “Licensed Products”) and for the research, development, manufacture and commercialization of Licensed Products.

Pursuant to the Agreement, we granted the Licensees a co-exclusive license (co-exclusive as to each Licensee) under the Licensed Patents to research, develop, manufacture and commercialize certain Products in the Field in the Territory (all as defined in the Agreement) and a non-exclusive license under the Licensed Patents to research, develop, manufacture and commercialize certain other Licensed Products in the Field in the Territory. We received $1 million as of June 30, 2008 and an additional $1 million in August, 2008 pursuant to this Agreement. In addition, we are eligible to receive certain milestones and royalties based on sale of Licensed Products as set forth in the Agreement.

Under the terms of the License Agreement, the Licensees have an option to receive ownership of all of our right, title and interest in and to the Licensed Patents if at any time during the term of the Agreement (i) Licensor and its sublicensees have abandoned all activities related to research, development and commercialization of all Intellect Products that are covered by the Licensed Patents and (ii) no licenses granted by Licensor under the Licensed Patents (other than the licenses granted to Licensees under the Agreement) remain in force. Abandonment includes a failure by Intellect to incur $50,000 in patent or program research related expenses during any six month period that the Agreement is in effect. Accordingly, initially we recorded the up-front payment of $1 million received from the Licensees as a Deferred Credit on our Consolidated Balance Sheet, representing our obligation to fund such future patent or program research related expenses, and recorded periodic amortization expense related to the deferred credit based on the remaining life of the License, which approximates the remaining life of the underlying patents.

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On July 31 2008, we obtained a European patent relating to our ANTISENILIN monoclonal antibody platform for the treatment of Alzheimer’s disease. The grant of the patent triggered a $1 million milestone payment under the License Agreement. We have accounted for this payment as revenue.

As described more fully below, in October 2008, we entered into an Option and License Agreement (the “Option Agreement”) with a top-tier global pharmaceutical company (“Option Holder”) regarding an option to purchase a license under certain patents (defined as “Subject Patents” in the Option Agreement). The patents are the same patents and patent applications as the Subject Patents arising from the Agreement with Elan and Wyeth described above.  Effective as of December 19, 2008, the Option Holder became the Licensee of the patents by paying the Exercise Fee described in the Option Agreement as adjusted by subsequent discussions between the parties to the Option Agreement. As a result, the Licensees’ option to receive ownership of all of our right, title and interest in and to the Subject Patents described above terminated as of December 19, 2008. Accordingly, we recognized the remaining balance of the deferred credit as income during the period ended December 31, 2008.

ANTISENILIN Option and License Agreement. In October 2008, we entered into an Option Agreement (the “Option Agreement”) by and among Intellect and a global pharmaceutical company (“Option Holder”) regarding an option to obtain a license under certain of our patents and patent applications (the “Subject Patents”) related to antibodies and methods of treatment for Alzheimer’s disease and to make, have made, use, sell, offer to sell and import certain Licensed Products, as defined in the Agreement.

Pursuant to the Agreement, we granted the Option Holder an irrevocable option to acquire a non-exclusive, royalty bearing license under the Subject Patents with the right to grant sublicenses, to develop, have developed, make, have made, use, offer to sell, sell, import and have imported Licensed Products in the Territory in the Field (the “Option”).

In consideration of the Option, the Option Holder paid us a non-refundable fee of five hundred thousand dollars ($500,000) (the “Option Fee”). In consideration of the exercise of the Option, the Option Holder agreed to pay us two million dollars ($2,000,000) (the “Exercise Fee”). Two hundred and fifty thousand dollars ($250,000) of the Option Fee is creditable against the Exercise Fee.

In addition, upon the later of (1) exercise of the Option, and (2) grant in the United States of a Licensed Patent with at least one Valid Claim that covers a Licensed Product in the Territory in the Field (as such terms are defined in the Agreement), we will receive two million U.S. dollars (U.S. $2,000,000). An additional milestone payment shall be made to us should the Option Holder achieve certain thresholds for aggregate annual Net Sales for any Licensed Product in countries in which there are then existing one or more Valid Claims covering the Licensed Product.

The Agreement also provides that we will be eligible to receive certain royalty payments from the Option Holder in connection with Net Sales of Licensed Products by the Option Holder, its affiliates and its permitted sublicensees. The term during which such royalties would be payable begins upon launch of a Licensed Product in a country (or upon issuance of a Valid Claim, whichever is later) and ending upon the date on which such Licensed Product is no longer covered by a Valid Claim in such country (as such terms are defined in the Agreement).

Effective as of December 19, 2008, the Option Holder became the Licensee of the Subject Patents by paying $1,550,000, which is the Exercise Fee described in the Option Agreement as adjusted by subsequent discussions between the parties to the Option Agreement.

GSK Option and License Agreement - ANTISENILIN. On  April 29, 2009, we entered into an Option Agreement (the “Agreement”) with Glaxo Group Limited (“GSK”) regarding an option to purchase a license under certain of Intellect’s patents and patent applications (the “Subject Patents”) related to antibodies and methods of treatment for Alzheimer’s disease.

Pursuant to the Agreement, we granted GSK an irrevocable option (the “Option”) to acquire a non-exclusive, royalty bearing license under the Subject Patents with the right to grant sublicenses, to develop, have developed, make, have made, use, offer to sell, sell, import and have imported Licensed Products in the Territory in the Field (as such terms are defined in the Agreement).

Upon exercise of the Option, GSK will pay us two million dollars ($2,000,000). In addition, upon the later of the (1) exercise of the Option, and (2) grant in the United States of a Licensed Patent with at least one Valid Claim that covers a Licensed Product incorporating a GSK Compound in the Territory in the Field (as such terms are defined in the Agreement), GSK will pay us an additional two million U.S. dollars (U.S. $2,000,000). An additional milestone payment will be made to us should GSK achieve certain thresholds for aggregate annual Net Sales for any Licensed Product in countries in which there are then existing one or more Valid Claims covering the Licensed Product.

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The Agreement provides that we will be eligible to receive certain royalty payments from GSK in connection with Net Sales of Licensed Products by GSK, its affiliates and its permitted sublicensees. The term during which such royalties would be payable begins upon launch of a Licensed Product in a country (or upon issuance of a Valid Claim, whichever is later) and ending upon the date on which such Licensed Product is no longer covered by a Valid Claim in such country (as such terms are defined in the Agreement).

PharmaSeed Transaction – Mindgenix.Effective as of July 15, 2008, Mindgenix and PharmaSeed Ltd., an Israeli company that provides drug testing services (“Pharmaseed”), entered into an Operating and Marketing Agreement under which Pharmaseed will manage MindGenix’ third party testing business, which involves the testing of compounds using APP/PS1 transgenic mice (the “Testing Business”). Pharmaseed will operate, at its expense, all aspects of the Testing Business, including invoicing and collecting client payments. MindGenix will be entitled to receive a portion of the revenue earned by Pharmaseed from the Testing Business. In addition, Pharmaseed will pay to MindGenix the portion of gross revenue due as royalty payments to USFRF and Mayo under their respective licenses, which are used to conduct the Testing Business. MindGenix would pay that money over to USFRF and Mayo. Pharmaseed has yet to make any payments to Mindgenix under this Agreement.

The term of the agreement is three years and is renewable every year for five years, at Pharmaseed’s sole discretion. Pharmaseed may terminate the agreement with 90 days prior notice MindGenix may terminate the agreement in the event that Pharmaseed has not used commercially reasonable efforts to maintain and develop the Testing Business. Also, the agreement may be terminated upon certain bankruptcy and insolvency events.

Pursuant to the agreement, Pharmaseed will manage all aspects of the Testing Business (facilities, personnel, etc.) at its own cost; market the Testing business at its own cost and discretion; invoice and collect payment from customers; purchase supplies and third-party services; and pay facilities utility costs for space/utilities used for the Testing Business. In addition, Pharmaseed will pay to MindGenix the amounts due to USFRF and Mayo per the terms of their respective license agreements on Testing Business revenue.

MindGenix’ retained obligations are to pay to USFRF and Mayo all amounts due per the terms of their respective license agreements on Testing Business revenue and forward Pharmaseed all documentation evidencing such payments; pay all liabilities incurred related to personnel and facilities not related to the Testing Business and all liabilities incurred prior to the effective date of the agreement; maintain responsibility for all corporate related permits, filings, tax returns and tax liabilities; maintain insurance naming Pharmaseed as an additional insured; and maintain all licenses required in order for Pharmaseed to conduct the Testing Business, including performance of all obligations towards Mayo and USFRF under the applicable license agreements.

From the revenue received from the Testing Business, Pharmaseed will pay the operating costs of the Testing Business (comprising its facilities and personnel overhead and consumables related to the Testing Business) and will pay MindGenix a quarterly fee equal to 10% of the difference between Pharmaseed’s revenues actually received directly from the Testing Business (other than revenues accepted from Intellect) less the Testing Costs. Also, Pharmaseed will pay to MindGenix, the license fees payable to USFRF and Mayo and MindGenix will pay such money over to the licensors and provide Pharmaseed with proper documentation of such payment.

Pursuant to the agreement, Pharmaseed will provide Intellect with preferred pricing and priority for testing services, equivalent to Testing Costs and license fees related to the Intellect projects plus 7% and will not pay MindGenix any fees with respect to such revenues.

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We continue to consolidate the accounts of Mindgenix because we have agreed to absorb certain costs and expenses incurred that are attributable to their research.

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Note 6. Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following:

	June 30, 2009		June 30, 2008
Accounts Payable	$	8,671	$	99,274
Due to Licensors		145,260		145,260
Professional Fees		1,403,906		1,560,054
Consulting Expenses		408,697		277,542
Payroll related Expenses		134,875		230,995
Clinical Expenses		1,299,288		1,595,783
Other		791,311		715,122
Total	$	4,192,008	$	4,624,030

Note 7.  Convertible Promissory Notes Payable

Convertible Promissory Notes and Warrants issued through the fiscal year ended June 30, 2006.

During the period beginning on May 10, 2005 through January 10, 2006, Intellect USA issued Convertible Promissory Notes in a private placement to accredited investors. Each investor purchased an investment unit consisting of a convertible promissory note (the "2006 Notes") and a warrant to purchase shares of our common stock (the "2006 Warrants"). The 2006 Notes were due on the earlier of May 10, 2006 or the closing of an equity financing or financings with one or more third parties with gross proceeds to us of not less than $5,000,000 (the "Next Equity Financing") except for the Note issued to HCP Intellect Neurosciences, LLC, with a face amount of $250,000, which was due on the earlier of January 5, 2006 or the closing of the Next Equity Financing. This Note was repaid on February 16, 2006.  The Next Equity Financing occurred on or about May 12, 2006.

The 2006 Notes bear interest at 10% and are unsecured obligations. At the option of the holder, principal and all accrued but unpaid interest on the Notes are convertible into the class of equity securities that we issue in the Next Equity Financing at a price per share equal to 100% of the price per equity security issued in the Next Equity Financing. There is no cash payment obligation related to the conversion feature and there is no obligation to register the common shares underlying the 2006 Notes.

The Notes essentially contain a call option on our common stock. APB 14 generally provides that debt securities which are convertible into common stock of the issuer or an affiliated company at a specified price at the option of the holder and which are sold at a price or have a value at issuance not significantly in excess of the face amount are not bifurcated into separate obligations. The terms of such securities generally include (1) an interest rate which is lower than the issuer could establish for nonconvertible debt, (2) an initial conversion price which is greater than the market value of the common stock at time of issuance, and (3) a conversion price which does not decrease except pursuant to anti-dilution provisions. The Notes do not satisfy these conditions, and accordingly the determination of whether the conversion feature should be accounted for separately should be governed by FASB Statement 133, “Accounting for Derivative Instruments and Hedging Activities”.

We have determined that based on the provisions of FASB Statement 133, the embedded conversion feature present in the 2006 Notes should not be valued separately at the commitment date. Under FASB 133, a contract that contains an “embedded” derivative instrument; i.e., implicit or explicit terms that affect some or all of the cash flows or the value of other exchanges required by the contract in a manner similar to a derivative instrument, must, under certain circumstances, be bifurcated into a host contract and the embedded derivative, with each component accounted for separately.  The issuer's accounting depends on whether a separate instrument with the same terms as the embedded written option would be a derivative instrument pursuant to paragraphs 6–11 of this Statement. Because the option is indexed to our own stock and a separate instrument with the same terms as the option would be classified in stockholders' equity in the statement of financial position, the written option is not considered to be a derivative instrument under paragraph 11(a) and should not be separated from the host contract.

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Under the terms of the 2006 Warrants, the number of shares underlying each 2006 Warrant is the quotient of the face amount of the related 2006 Note divided by 50% of the price per equity security issued in the Next Equity Financing. The 2006 Warrant exercise price is 50% of the price per equity security issued in the Next Equity Financing. The maximum number of shares available for purchase by an investor is equal to the principal amount of such holder's 2006 Note divided by the warrant exercise price. We recorded the liability for the 2006 Notes at an amount equal to the full consideration received upon issuance, without considering the 2006 Warrant value because the determination of the number of warrants and the exercise price of the warrants is dependent on the stock price issued in the Next Equity Financing, which did not take place until May 12, 2006, subsequent to the issue date of the 2006 Notes. On May 12, 2006, Intellect USA issued the 2006 Warrants, entitling the holders to purchase up to 2,171,424 shares of our common stock. The 2006 Warrants expire five years from date of issuance of the related 2006 Note. We valued the 2006 Warrants as of May 12, 2006, the measurement date, and recorded a charge to interest expense and a corresponding derivative liability of $746,972. See Note 9, Derivative Instrument Liability, for a further discussion of the liability related to the issuance of the 2006 Warrants.

On December 1, 2006, holders of 2006 Notes with an aggregate face amount of $250,000 agreed to extend the maturity date of the Notes to December 20, 2006 and waive any event of default with respect to the Notes in exchange for the issuance of 111,150 warrants to purchase our common stock at an exercise price of $2.50 per share.

On July 13, 2007, we repaid a 2006 Note with a principal amount of $25,000 and accrued interest of $3,715 and entered into an agreement with the holder of the remaining outstanding 2006 Note with a face amount of $25,000 to extend the maturity date to September 30, 2007 and to waive an event of default in exchange for our agreement to issue 11,522 shares of our common stock. On November 6, 2007 we entered into another extension agreement with this note holder to extend the maturity date to the earlier of December 15, 2007 or our next equity financing and agreed to issue 30,000 shares of our common stock, which we issued on December 10, 2007. We recorded interest expense of $11,100 related to the issuance of the shares. In February 2008, we rescinded the issuance of the 30,000 shares of common stock and the Note holder agreed to extend the maturity date of the Note to the earlier of March 31, 2008 or our next financing of not less than $5,000,000 and to waive any prior events of default.  In exchange, we issued to the Note holder an additional note with a principal amount of $75,000 for no additional consideration. We recorded the fair value of the common stock that was cancelled as a liability. The additional note will be accreted up to its face value of $75,000. The additional note bears interest at 10%, is an unsecured obligation and is due not later than February 15, 2009. Principal and all accrued but unpaid interest on the additional note is convertible into our common stock at a conversion price of $1.75 per share. In addition, principal and all accrued but unpaid interest on the additional note is convertible into the class of securities that we issue in the next financing.  We repaid the remaining 2006 Note with the face amount of $25,000 together with accrued interest of $6,132 on June 12, 2008.

As a result of the above, as of June 30, 2009 and 2008, all of the original 2006 Notes have been repaid or converted into shares of our Series B Preferred Stock and warrants to purchase up to 2,282,574 shares of our common stock are issued and outstanding.  Also, an additional note with a face amount of $75,000 is outstanding and past due at June 30, 2009 and 2008.

Convertible Promissory Notes and Warrants issued during the fiscal year ended June 30, 2007 (“2007 Notes”).

During the fiscal year ended June 30, 2007, we issued $5,678,000 aggregate face amount of Convertible Promissory Notes (the “2007 Notes”) together with warrants to purchase up to 3,236,000 shares of our common stock at a price of $1.75 per share. All of the 2007 Notes bear interest at 10% and are unsecured obligations. Certain of the 2007 Notes are due no later than 6 months from the date of issuance and others are due no later than one year from the date of issuance. The 2007 Notes are repayable before that time if we close an equity financing with gross proceeds of not less than $5 million or a licensing transaction with a collaborative partner that results in an upfront payment to us of not less than $4 million. At the option of the holders of the 2007 Notes, principal and all accrued but unpaid interest are convertible into common stock of the Company. The number of shares of common stock to be issued is calculated by dividing the outstanding principal amount plus accrued interest on the date of conversion by 1.75 (subject to adjustment as provided in the Notes). There is no cash payment obligation related to the conversion feature and there is no obligation to register the common shares underlying the 2007 Notes except for standard “Piggyback registration” obligations.

We determined the initial fair value of the warrants issued to the purchasers of the 2007 Notes to be $3,425,861 based on the Black-Scholes option pricing model, which we treated as a liability with a corresponding decrease in the carrying value of the 2007 Notes. This difference has been amortized over the term of the 2007 Notes as interest expense, calculated using an effective interest method. See Note 9, Derivative Instrument Liability, for a further discussion of the liability related to the issuance of the warrants.

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During the fiscal year ended June 30, 2007, we incurred placement fees of $340,000 and issued 485,714 warrants to a placement agent in connection with the issuance of 2007 Notes with an aggregate face amount of $3.4 million.  We recorded the $340,000 placement fee and the value of the warrants as deferred financing costs, which have been amortized over the term of these 2007 Notes, without regard to any extension of the maturity date of such Notes. We determined the initial fair value of the warrants on the closing date of July 5, 2007 to be $1,116,250 using the Black Scholes option pricing model. This amount was recorded as a warrant liability with an offset to deferred financing costs. The warrant liability will be marked to market at each future reporting date. See Note 9, Derivative Instrument Liability, for a further discussion of the liability related to the issuance of the 2007 Warrants.

In July 2007, we entered into Extension Agreements with certain holders of 2007 Notes due in June and July 2007 to extend the maturity date of such Notes to not later than September 30, 2007 and October 31, 2007, respectively, and issued to such holders an aggregate amount of 300,000 shares of our common stock and 107,003 warrants to purchase our common stock, at an exercise price of $1.75 per share.

Also, in July 2007, Notes with an aggregate face amount of $30,000 were past due. We entered into extension agreements with the holders of these Notes and cancelled the 8,571 warrants that we issued to them at the time of original issuance of the Notes and issued to these holders 17,400 replacement warrants. The extension warrants are accounted for as a liability with an offset to interest expense. Subsequently, in July 2007, these holders converted their 2007 Notes into 18,240 common shares at a conversion price of $1.75. On April 8, 2008, we rescinded the conversion of the Notes into common shares and reinstated the Notes and agreed with the holders to extend the maturity date to June 30, 2008.

As a result of the above, as of June 30, 2009 and  2008, we are in default with respect to all but one and all of the of the remaining 2007 Notes, respectively, which have an aggregate carrying value of $5479,604 and $5,305,088, respectively. In addition, warrants to purchase 3,837,546 shares of our common stock are issued and outstanding at June 30, 2009 and 2008, respectively, in connection with the issuance of the 2007 Notes.

On October 21, 2008, one of our note holders filed a complaint in the United States District Court of the Southern District of New York claiming that approximately $541,000 of principal and accrued interest was past due and that he was entitled to a money judgment against us for all amounts due under the note, plus attorney’s fees, costs and disbursements. The suit also alleged that David Blech and Margie Chassman had provided personal guarantees to this note holder guaranteeing all of our obligations under the note. Margie Chassman is one of our principal shareholders and David Blech is her husband and a consultant to the Company.  The matter was settled on April 22, 2009 and the note holder released the Company from all of the claims set forth above.  In connection with the settlement, Margie Chassman purchased the note from the note holder and agreed to cancel it. In exchange, we issued Margie Chassman an additional Senior Note Payable (as defined below) with a face amount of $310,000 and repaid $100,000 of Notes held by Ms. Chassman. We did not issue any additional warrants to Ms. Chassman.

Convertible Promissory Notes and Warrants issued during the fiscal year ended June 30, 2008 (“2008 Notes”).

During the fiscal year ended June 30, 2008, we issued convertible promissory notes with an aggregate face amount of $325,000 (“the 2008 Notes”) due 12 months from date of issuance. The 2008 Notes bear interest at 10% and are unsecured liabilities, except for one Note with a face amount of $100,000 that bears interest at 17% and is due six months from the date of issuance. At the option of the holder, the principal and all accrued but unpaid interest are convertible into common stock of the Company. The number of shares of common stock to be issued is calculated by dividing the outstanding principal amount plus accrued interest on the date of conversion by 1.75.  In connection with the 2008 Notes, we issued 185,744 warrants.

We determined the initial fair value of the warrants issued with the 2008 Notes to be $52,740 based on the Black-Scholes option pricing model, which has been treated as a liability with a corresponding decrease in the carrying value of the 2008 Notes. See Note 9, Derivative Instrument Liability, for a further discussion of the liability related to the issuance of the warrants. This difference will be amortized over the term of the 2008 Notes as interest expense calculated using an effective interest method.

The carrying value of the outstanding 2008 Notes as of June 30, 2009 and 2008 were $325,000 and $304,313, respectively. As of June 30, 2009 and 2008, , we were in default with respect to 2008 Notes with an aggregate face amount of $180,000 and $165,000, respectively. In July 2008 the maturity dates of 2008 Notes with an aggregate face amount of $135,000 have been extended until July 31, 2013 pursuant to the royalty transaction described below and are now included as part of the Notes Payable described below.

Convertible Promissory Notes Issued Without Warrants.

Through the fiscal year ended June 30, 2008, we issued Convertible Promissory Notes without warrants with an aggregate face amount of $5,984,828 that are due one year from date of issuance (the “Warrantless Notes”). The notes bear interest at 8% and are unsecured obligations. At the option of the holder, principal and all accrued but unpaid interest with respect to the notes are convertible into our common stock. The number of shares of common stock to be issued is calculated by dividing the outstanding principal amount plus accrued interest on the date of conversion by 1.75. There is no cash payment obligation related to the conversion feature and there is no obligation to register the common shares underlying the notes except for “Piggyback registration” obligations.  Through the fiscal year ended June 30, 2008, we repaid Warrantless Notes with an aggregate principal amount of $1,286,000.

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During July 2008, we issued additional Warrantless Notes with identical terms and an aggregate principal amount of $268,500, of which $75,000 was provided by related parties. As of June 30, 2009 and 2008, the outstanding principal balance of the Warrantless Notes was $5,242,328 and $4,698,828, respectively of which $3,808,828 and $3,423,828, respectively, was owed to a related party. As more fully described below, on July 31, 2008, the Warrantless Notes effectively were exchanged for Notes Payable.

Royalty Participation Transaction

On May 2, 2008, our  Board approved a term sheet (the “Term Sheet”) containing the material terms of a transaction (the “Transaction”) to be entered into among the Company, as obligor, and certain existing shareholders of and lenders to the Company (the “Existing Investors”) and any other lenders who participate in the Transaction (together with the Existing Investors, the “Lenders”).

Pursuant to the Term Sheet, the Existing Investors, who held convertible promissory notes with an aggregate face amount of approximately $3,500,000 plus accrued interest (the “Convertible Notes”) as of March 2008, and other Lenders agreed to lend an additional $1,500,000 to $2,225,000 to the Company during the period commencing April 15, 2008 and ending on September 1, 2008. As consideration for the loans, we agreed to exchange the outstanding Convertible Notes for a new senior note (the “Senior Note Payable”), 3,271,429 warrants to purchase our common stock and the right to participate in future royalties, if any, received by us from the license of our ANTISENILIN patents and patent applications (the “Royalty Participation”).

The Senior Note Payable will have a maturity date of five years from execution of final documentation and will bear interest at 10% per annum payable in registered common stock of the Company or cash, at the Company’s option. The warrants will have an exercise price of $1.75 per common share and contain full anti-dilution protection. The Royalty Participation will entitle the Lenders to 25% of royalties received by the Company from a license of the ANTISENILIN patent estate in perpetuity.

Effective as of July 31, 2008, holders of Warrantless Notes with an aggregate face amount of $4,967,328 and holders of  2008 Notes with an aggregate face amount of $107,672 exchanged their Warrantless Notes and Convertible Notes, respectively, for a Senior Notes Payable pursuant to the term sheet described above. In addition, unrelated party lenders advanced $650,000 to us in exchange for a Senior Note Payable.  Accordingly, we issued to the holders of the Warrantless Notes and the other lenders new Senior Notes Payable with an aggregate face amount of $5,725,000 dated as of July 31, 2008, together with 3,271,429 warrants, and granted these holders and lenders the right to receive 25% of future royalties that we receive from the license of our ANTISENILIN patent estate.

We accounted for the exchange of the Convertible Promissory Notes, as described above, as an extinguishment of debt in accordance with EITF 96-19 “Debtor’s Accounting for a Modification or Exchange of Debt Instruments.” We determined that the net present value of the cash flows under the terms of the exchange was more than 10% different from the present value of the remaining cash flows under the terms of the original Convertible Promissory Notes. Due to the substantial difference, we determined an extinguishment of debt had occurred as a result of the exchange, and, as such, we concluded that it was necessary to reflect the Convertible Promissory Notes at fair market value and record a loss on extinguishment of debt of approximately $702,000 in the three-month period ended September 30, 2008.

We have accounted for the issuance of a Senior Note Payable with a face amount of $650,000 to an unrelated party as a new issuance. We have accounted for the 371,429 Royalty Warrants issued to this holder as a liability, measured at fair value, which has been offset by a reduction in the carrying value of the associated Senior Note Payable. See Note 9, Derivative Instrument Liability.)

On March 22, 2009, in connection with the settlement of the note holder litigation described above, one of our shareholders who is a related party purchased the 2007 Note, then in default, from the note holder and agreed to cancel the Note. In exchange, we issued to the related party shareholder an additional Senior Note with a face amount of $310,000 and repaid $100,000 of Notes held by the shareholder. We did not issue any additional warrants to the shareholder.

At June 30, 2009 and 2008, Senior Notes Payable to related parties of $3,808,828 and $0.0, respectively, and Senior Notes Payable to unrelated parties with a carrying value of $2,104,777 and $0.0, respectively, were  outstanding.

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Note 8. Series B Convertible Preferred Stock

In February 2006, Intellect USA’s Board of Directors authorized the issuance of up to 7,164,445 shares of convertible preferred stock to be designated as "Series B Convertible Preferred Stock" ("Old Series B Preferred") with a par value per share of $0.001. The shares carry a cumulative dividend of 6% per annum. The initial conversion price of the Old Series B Preferred is $1.75 and is subject to certain anti-dilution adjustments to protect the holders of the Old Series B Preferred in the event that we subsequently issue shares of common stock or warrants with a price per share or exercise price less than the conversion price of the Old Series B Preferred.  The amount of additional common shares underlying potential future conversions of Old Series B Preferred is indeterminate. A holder of Old Series B Preferred is entitled to vote with holders of our common stock as if such holder held the underlying common stock. In the event of liquidation, dissolution or winding up of the Company, the Old Series B Preferred stockholders are entitled to receive, after payment of liabilities and satisfaction of Series A Convertible Preferred Stock but before the holders of common stock have been paid, $1.75 per share subject to adjustment for stock splits and dividends and certain other circumstances, plus accrued but unpaid preferred dividends. In addition, Intellect USA’s Board of Directors authorized the issuance of warrants to purchase our common stock in connection with each sale of Series B Preferred.

During the period February 8, 2006 through December 31, 2006, Intellect USA issued 4,593,091 shares of Old Series B Preferred in a private placement to accredited investors. Each investor purchased an investment unit consisting of a share of Old Series B Preferred and a warrant to purchase 0.5 shares of our common stock (the "Series B Warrants"). Total proceeds from issuance of the Old Series B Preferred for the year ended June 30, 2006 were $6,384,794, which included the cancellation of Notes with an aggregate face amount of $1,100,000 and accrued interest of $67,294 and for the year ended June 30, 2007 was $1,653,122, which included the cancellation of Notes with an aggregate face amount of $100,000 and accrued interest of $9,472.  In connection with the issuance of the Old Series B Preferred, we issued warrants to purchase up to 3,046,756 shares of our common stock. See Note 8 for a further discussion of the liability related to the issuance of the Series B Warrants.

On the closing date of the reverse merger, the Holders of Series A Preferred, Old Series B Preferred and common stock of Intellect exchanged all of their shares in Intellect USA for the right to receive, in the aggregate, 26,075,442 shares of our common stock, $0.001 par value per share. The outstanding shares of Intellect USA Series B Preferred stock converted into 4,593,091 shares of our common stock. Accordingly, the liability of $3,114,115 related to the Series B Preferred stock was reclassified to preferred stock and additional paid in capital. As further described below, in May 2007 we exchanged the 4,593,091 shares of common stock for 459,309 shares of new Series B Preferred Stock.

Exchange of Series B Convertible Preferred Stock. Certain stockholders of the Company (each a “Holder” and collectively, the “Holders”) owned, prior to the Merger, an aggregate of 4,593,091 shares of Old Series B Preferred. Pursuant to the Certificate of Incorporation of Intellect, as in effect prior to the Merger, such Old Series B Preferred had certain anti-dilution and other rights and privileges. As a result of the Merger, each share of Old Series B Preferred issued and outstanding prior to the Merger was converted into one share of the Company’s common stock. Pursuant to discussions with the Holders at the time of the Merger, we agreed to exchange the Common Stock received by the Holders in the Merger for shares of a new series of preferred stock of the Company, designated as Series B Convertible Preferred Stock of the Company, $0.001 par value per share (“New Series B Preferred”). In order to provide such Holders with the same designations, preferences, special rights and qualifications, limitations or restrictions with respect to our capital stock that the Holders of Old Series B Preferred previously had in relation to Intellect USA’s capital stock, based on the capitalization of the Company, which includes 1 million authorized shares of preferred stock, rather than the 10 million authorized preferred shares prior to the merger, we exchanged each share of Common Stock issued to the Holders pursuant to the Merger for one-tenth (1/10) of a share of New Series B Preferred.

On or about May 15, 2007, pursuant to separate exchange agreements with the Holders (the “Exchange Agreements”), we completed the Exchange whereby 4,593,091 shares of Common Stock were exchanged for 459,309 shares of New Series B Preferred in an exchange offering pursuant to Section 3(a)(9) under the Securities Act of 1933, as amended (the “Securities Act”). Upon the consummation of the Exchange and the execution and delivery of the Exchange Agreements, each Holder received approximately 1 share of New Series B Preferred in exchange for 10 shares of Common Stock. The Company took a charge of $6,606,532 to other expense which represents the difference in the fair value of the New Series B Preferred over the Old Series B Preferred at the date of the Merger.

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The New Series B Preferred contains the same anti-dilution features as in the Old Series B Preferred. As a result, the amount of additional common shares underlying potential future conversions of New Series B Preferred is indeterminate. Accordingly we have accounted for the New Series B Preferred as derivative liabilities at the time of issuance using the Black Scholes Option pricing model. We recorded the amount received in consideration for the New Series B Preferred as a liability with an allocation to the Series B Warrants and the difference recorded as additional paid in capital. The liability related to the New Series B Preferred will be marked to market for all future periods the shares remain outstanding and changes in fair value will be recognized as other income or expense.  At June 30, 2009 the Series B Preferred stock liability was $872,867 with a change (decrease) in fair value of $1,561,516 for the year ended June 30, 2009, recorded in other income. See Note 9, Derivative Instrument Liability, for a further discussion of the liability related to the issuance of the Series B Preferred Warrants.

The Old and New Series B Preferred carry a cumulative dividend of 6% per annum because we have failed to satisfy the conditions for resetting the dividend amount to zero. Under the Certificate of Designation of the New Series B Preferred Shares, dividends accrue from the date specified for payment in the Certificate of Designation of the Old Series B Preferred Shares.  The dividend is payable semi-annually in arrears on January 1 and July 1 of each year, commencing July 1, 2006. The amount of dividends payable for the period ended on July 1, 2006 (and for any dividend payment period shorter than a full semi-annual dividend period) is computed on the basis of a 360-day year of twelve 30-day months. As of June 30, 2009 and 2008, we have accrued Series B Preferred Stock dividends payable of $1,574,036 and $1,085,062, respectively, which are recognized as interest expense.

Note 9. Derivative Instrument Liability

Derivativeinstruments consist of the following:

	June 30, 2009		June 30, 2008
Warrants issued with Convertible Promissory Notes:	$	264,126	$	1,403,763
Warrants issued with Series B Convertible Preferred Stock:		43,780		597,793
Total	$	307,906	$	2,001,556

Warrants issued with Convertible Promissory Notes.

As described above in Note 7, Convertible Promissory Notes Payable, in connection with the issuance of Convertible Promissory Notes, we issued warrants to purchase up to 6,305,834 shares of our common stock, of which 2,282,574 were issued in connection with Notes issued during fiscal year ended June 30, 2006; 3,837,546 were issued in connection with Notes issued during fiscal year June 30, 2007; and 185,714 were issued in connection with Notes issued during fiscal year June 30, 2008.

The Convertible Note Warrants provide the holder with “piggyback registration rights”, which obligate the Company to register the common shares underlying the Warrants in the event that the Company decides to register any of its common stock either for its own account or the account of a security holder (other than with respect to registration of securities covered by certain employee option plans). The terms of the Warrants fail to specify a penalty if the Company fails to satisfy its obligations under these piggyback registration rights. Presumably, the Company would be obligated to make a cash payment to the holder to compensate for such failure. EITF 00-19 requires liability treatment for a contract that may be settled in cash. Accordingly we have accounted for the Convertible Note Warrants as liabilities. The liability for the Convertible Note Warrants, measured at fair value as determined in the manner described below, has been offset by a reduction in the carrying value of the Notes. The liability for the Convertible Note Warrants will be marked to market for each future period they remain outstanding.

At June 30, 2009 the weighted average exercise price of the outstanding Warrants is $1.47 per common share and the weighted average remaining life of the warrants is 2.34 years.  The Convertible Note Warrant liability was $264,126 with a change (decrease) in fair value of the warrants that were outstanding on June 30, 2008 of $1,139,637 for the fiscal year ended June 30, 2009, recorded in other income.  At June 30, 2008, the weighted average exercise price of the outstanding Warrants is $1.42 per common share and the weighted average remaining life of the warrants is 3.25 years.  The Convertible Note Warrant liability was $1,403,763 with a change (decrease) in fair value of the warrants that were outstanding on June 30, 2007 of $14,403,521 for the fiscal year ended June 30, 2008, recorded in other income.

Warrants issued with the Series B Convertible Preferred Stock (the “Series B Warrants”).

In connection with the issuance of the Old Series B Preferred stock described above, we issued warrants to purchase up to 3,046,756 shares of our common stock for the year ended June 30, 2006 and 186,692 shares of our common stock for the year ended June 30, 2007 (see Note 8, Series B Convertible Preferred Stock). As described above in Note 8, Series B Convertible Preferred Stock, each investor purchased an investment unit consisting of a share of Old Series B Preferred and a warrant to purchase 0.5 shares of our common stock. The largest of the Series B investors received an additional 750,210 warrants above the amount of warrants that he would have otherwise been entitled to in connection with his purchase of the Old Series B Preferred Stock. The initial exercise price of the Series B Warrants was $2.50 per common share, subject to the anti dilution protection contained in the Old and New Series B Preferred Stock. During January 2007, we issued Convertible Notes with warrants that are convertible into common stock at an exercise price of $1.75. Accordingly, the strike price of the Series B Warrants has been reduced to $1.75 pursuant the anti-dilution adjustment described above.

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The Series B Warrants contain certain anti-dilution adjustments to protect the holders of the Series B Warrants in the event that we subsequently issue shares of common stock or warrants with a price per share or exercise price less than the exercise price of the Series B Warrants. In addition, the Series B Warrants provide for cashless exercise under certain circumstances. Accordingly, the amount of additional shares underlying potential future issuances of Series B Warrants is indeterminate. There is no specified cash payment obligation related to the Series B Warrants and there is no obligation to register the common shares underlying the Series B Warrants except in the event that we decide to register any of our common stock for cash (“piggyback registration rights”). Presumably, the Company would be obligated to make a cash payment to the holder if we failed to satisfy our obligations under these piggyback registration rights.

EITF 00-19 requires liability treatment for a contract that may be settled in cash or that contains a provision for an indeterminate number of shares to be delivered in a share settlement. The Series B Warrants encompass both of these conditions. Accordingly we have accounted for the Series B Warrants as liabilities. The liability for the Series B Warrants, measured at fair value as determined in the manner described below, has been offset by a charge to earnings rather than as a discount from the carrying value of the Series B Preferred. The liability for the Series B Warrants will be marked to market for each future period they remain outstanding.

As of June 30, 2009 and 2008, we had 3,046,756 Series B Warrants outstanding. The weighted average strike price of the Series B warrants is $1.75 per common share and the weighted average remaining life of the warrants is 1.65 and 2.65 for the years ended June 30, 2009 and 2008, respectively,.  At June 30, 2009 and 2008 the Series B Warrant liability was $43,780 and $597,794 with a change (decrease) in fair value of $554,013 and $6,751,518, for the fiscal years ended June 30, 2009 and 2008, respectively, recorded in other income.

Note 10. Income Taxes

Effective July 1, 2007, we adopted the provisions of Financial Accounting Standards Board (FASB) Interpretation No. 48 (“FIN 48”) “Accounting for Uncertainty in Income Taxes- an interpretation of FASB Statement No. 109”. The implementation of FIN 48 had no impact on our financial statements as we have no unrecognized tax benefits. We are primarily subject to U.S. Federal, New York State and Israeli income tax. Our policy is to recognize interest and penalties related to income tax matters in income tax expense. As of June 30, 2009, we had no accruals for interest or penalties related to income tax matters. We are open to review by the major tax jurisdictions above for all tax years since our inception,

At June 30, 2009, we had approximately $25.3 million of net operating loss carry forward ("NOL's") available, which expire in various amounts in years beginning in 2025 through 2028. Future ownership changes may limit the utilization of the net operating loss carry-forward as defined by the Internal Revenue Code.  At June 30, 2009, we had a deferred tax asset of approximately $12.3 millionrepresenting the benefit of our net operating loss carry forward and certain costs such as certain research and development capitalized for tax purposes.  The net deferred tax asset has been fully offset by a valuation allowance due to uncertainty regarding our ability to generate sufficient taxable income in the future to utilize these deferred tax assets.   The difference between the statutory federal tax rate of 34% and our effective tax rate is due to certain expenses not deductible for tax purposes and a valuation allowance for the period ended June 30, 2009.

Note 11. Capital Deficiency

Common stock. In April and May 2005, we issued 12,078,253 and 9,175,247 shares of common stock at $0.001 per share to founders of Intellect USA, yielding proceeds of $12,078 and $9,175, respectively.

On March 10, 2006, we amended our Certificate of Incorporation to provide for the issuance of up to 100,000,000 shares of common stock and up to 15,000,000 shares of preferred stock each with a par value of $.001 per share.

In June 2005, we issued to Goulston & Storrs, LLP a warrant to purchase 100,000 shares of our common stock at a purchase price of $0.001 per share, expiring June 20, 2008.  In April 2006, Goulston & Storrs exercised the warrant and we subsequently delivered to them a share certificate representing 100,000 shares of our common stock.

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Series A Convertible Preferred Stock. In January 2006, the Board of Directors of Intellect USA authorized the issuance of 2,225 shares of Series A Convertible Preferred Stock, par value per share of $0.001 (the "Series A Preferred"), to the Institute for the Study of Aging (the "ISOA") as partial consideration for settlement of an Annex IV claim equal to $570,000. In January 2006, Intellect USA entered into an Assignment of Claim Agreement, a Subscription Agreement and a Letter Agreement with the ISOA pursuant to which we issued the Series A Preferred to the ISOA and agreed to pay $193,297 in three equal monthly installments of $64,432 payable quarterly through July 28, 2006, and agreed to pay specific milestone payments totaling $225,500 as we develop our lead product candidate, OXIGON. We valued the Series A Preferred at $198,868 and charged such amount to research and development expenses during the year ended June 30, 2006. As described above, the "Next Equity Financing" occurred on or about May 12, 2006 when aggregate gross proceeds from the sale of Series B Convertible Preferred Stock exceeded $5 million. The conversion price of the convertible preferred stock issued in the Next Equity Financing and the price per share of the convertible preferred stock issued in that financing both were $1.75. Accordingly, the conversion price of the Series A Preferred as of May 12, 2006 is $1.75 per share of our common stock.

Based on FASB Statement No. 123R, "Share Based Payment" and EITF Issue No. 96-18, "Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services", we have recorded the value of the Series A Preferred as a research and development expense with a corresponding charge to Additional Paid In Capital on the issue date because all matters required to be attended to by the IOSA was completed as of that date. The fair value of the Series A Preferred has been estimated as $88.19 per share, for a total value of $198,868.

 As a result of the merger described below, the Series A Preferred Stock was exchanged for 128,851 shares of our common stock.

On January 25, 2007, GlobePan Resources, Inc. entered into an agreement and plan of merger with Intellect and INS Acquisition, Inc., a newly formed, wholly-owned Delaware subsidiary of GlobePan Resources, Inc. also called Acquisition Sub.  On January 25, 2007, Acquisition Sub merged with and into Intellect Neurosciences, Inc., Acquisition Sub ceased to exist and Intellect survived the merger and became the wholly-owned subsidiary of GlobePan Resources, Inc. GlobePan stockholders retained, in the aggregate, 9,000,000 shares of their common stock, which represents approximately 26% of the basic outstanding shares, in connection with the merger.

In January 2006, our Board of Directors authorized the issuance of 2,225 shares of Series A Convertible Preferred Stock, par value per share of $0.001, to the Institute for the Study of Aging. As a result of the Merger described above, the Series A Preferred Stock was exchanged for 128,851 shares of our common stock.

In July 2007, we issued a total of 329,762 shares of common stock to various note holders.  We issued 311,522 shares as part of agreements with three note holders to extend the maturity date of their notes to September 30, 2007 and recorded a charge of $622,354 for interest expense in connection with the issuance of these shares.  We issued 18,240 shares to three note holders who converted their Notes with an aggregate principal amount and accrued interest of $31,733.  On April 8, 2008, we rescinded the conversion of these Notes into common shares and reinstated the Notes and agreed with the holders to cancel the shares and extend the maturity date of the Notes to June 30, 2008.

In December 2007, we issued 30,000 shares of common stock under a pre existing agreement with a note holder to extend the maturity date of his note to December 15, 2007. As discussed above in Note 7, Convertible Promissory Notes Payable, in February 2008 we rescinded the issuance of the 30,000 shares of common stock and issued a note to the Note holder as additional consideration for the extension.

In July 2007, we entered into an agreement to issue 50,000 shares to a consultant for services rendered and recorded an expense of $120,000 representing the value of the shares based on the closing price of our common stock on that date. The Board of Directors approved the share issuance in November 2007 and the shares were issued in December 2007.

Note 12. Related Party Transactions

During the fiscal year ended June 30, 2007, we borrowed a total of $1,279,000 from certain of our principal shareholders to fund our operating costs. The loans were evidenced by convertible notes that are payable within one year and bear interest annually at 8%. The number of shares of our common stock to be issued pursuant to these notes is equal to the outstanding principal and accrued interest on each note at the date of conversion divided by $1.75. As of June 30, 2007, notes with an aggregate face amount of $300,000 had been repaid

During the fiscal year ended June 30, 2008, we borrowed an additional $3,338,828 from these shareholders evidenced by notes with the same terms as described above (including $104,244 described below). As of June 30, 2008, notes with an aggregate face amount of $894,000 had been repaid.  The remaining balance of these shareholder loans as of June 30, 2008 was $3,423,828.

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During the three months ended September 30, 2008, we borrowed an additional $75,000 from these shareholders evidenced by notes with the same terms as described above.

During the three months ended March 31, 2009, we borrowed an additional $410,000 from these shareholders evidenced by notes with the same terms as described above and repaid notes with an aggregate amount of $100,000.  During the three months ended June 30, 2009 we repaid a note with a value of $10,000. The remaining balance of these shareholder loans as of June 30, 2009 was $3,773,828.

Effective as of July 31, 2008, these shareholders and certain other lenders exchanged their convertible notes for Senior Promissory Notes and warrants. (See Note 7, Convertible Promissory Notes Payable.)

University of South Florida Agreement. Our AD research activities require that we test our drug candidates in a certain type of transgenic mouse that exhibits the human AD pathology. Mindgenix, Inc., a wholly-owned subsidiary of Mindset, holds a license on the proprietary intellectual property related to these particular mice from the University of South Florida Research Foundation (“USFRF”). We have engaged Mindgenix to perform testing services for us using these transgenic mice. Dr. Chain, our CEO, is a controlling shareholder of Mindset. We consolidate the results of operations of Mindgenix with our results of operations because we have agreed to absorb certain costs and expenses incurred that are attributable to their research.

In December of 2006, we entered into an agreement with USFRF as a co-obligor with Mindgenix, pursuant to which USFRF agreed to reinstate the license with Mindgenix in exchange for our agreement to pay to USFRF $209,148 plus accrued interest of $50,870. This amount is in settlement of a previously outstanding promissory note issued by Mindgenix to the USFRF dated September 30, 2004. Our obligation to pay amounts due under the agreement are as follows:  $109,148 was payable on January 15, 2007 and $100,000 is payable in six equal monthly installments of $16,667 beginning February 1, 2007 and ending with a final payment of $50,435 on August 1, 2007.  We have paid $184,151 through June 30, 2009.  We have recorded these amounts as research and development expense and established a liability for the remainder of the payments. In addition, we have incurred approximately $325,000 in operating costs on behalf of Mindgenix for the fiscal year ended June 30, 2009.  These amounts have been included in our consolidated results of operations as research and development expense.

In April 2008, we paid $100,000 on behalf of Mindgenix and Mindgenix issued a promissory note with a face amount of $100,000 to Harlan Biotech, Israel, an unrelated third party (‘the “Harlan Note”), as partial payment for past due fees related to maintenance of Mindgenix’ mouse colony.   The Harlan Note bears interest at 10% per annum and is due 40 days from the issue date of April 8, 2008. One of our principal shareholders posted with an escrow agent 215,000 shares of freely tradable Intellect common stock as security for the Harlan Note. The shares were sold for total consideration of $104,244 and the proceeds were remitted to Harlan in discharge of the Harlan Note. We issued a convertible promissory note to the shareholder with a face amount of $104,244 and recorded a corresponding research and development expense.

Related Party Consulting Fees.  On January 3, 2007 we entered into a consulting contract with a former member of our Board of Directors and significant shareholder pursuant to which he is to provide us with consulting services related to identifying, soliciting and procuring collaboration agreements on behalf of Intellect.  Under the agreement, Intellect is obligated to pay this former director and shareholder consulting fees of $10,000 per month beginning in January 2007.  In addition, to the extent permitted under our applicable group health insurance policy, we are obligated to provide health insurance to this individual and his family without any reimbursement from him.  In further consideration of the provision of services by this individual, he is entitled to receive cash payments in an amount equal to 2.5% of all revenues received by us, including payments we receive from collaboration agreements, as we realize the revenue through the receipt of cash payments from third parties.  Total amounts payable to this former director and shareholder under the Consulting Agreement are limited to $1 million, calculated by taking into account all consulting fees paid to this director, cost of health insurance and revenue participation payments.  The agreement may be terminated by us with or without cause at any time, provided however, that we have fulfilled our monetary obligations described above. During the year ended June 30, 2007, we paid this former director and shareholder $5,000 in consulting fees and $31,982 in health insurance. During the year ended June 30, 2008, we accrued $110,000 of consulting expense for this former director and shareholder but made no cash payments to him. During the year ended June 30, 2009, we accrued $120,000 of consulting expense for this former director and shareholder and during December 2008 made a $20,000 cash payment to him, of which $11,803 was for travel expenses and the remainder was for consulting services.

 Consulting Contracts. We have entered into consulting contracts with various members of our Board of Directors and the members of our Clinical and Scientific Advisory Boards. Certain of these individuals are shareholders of Intellect. The consulting contracts are for services to be rendered in connection with ongoing research and development of our drug candidates. The contracts generally provide for per-diem payments of $2,500 for days spent away from the office attending to Intellect affairs.

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Note 13. Commitments and Contingencies.

In the ordinary course of business, we enter into agreements with third parties that include indemnification provisions which, in our judgment, are normal and customary for companies in our industry sector. These agreements are typically with business partners, clinical sites, and suppliers. Pursuant to these agreements, we generally agree to indemnify, hold harmless, and reimburse indemnified parties for losses suffered or incurred by the indemnified parties with respect to our product candidates, use of such product candidates, or other actions taken or omitted by us. The maximum potential amount of future payments we could be required to make under these indemnification provisions is unlimited. We have not incurred material costs to defend lawsuits or settle claims related to these indemnification provisions. As a result, the estimated fair value of liabilities relating to these provisions is minimal. Accordingly, we have no liabilities recorded for these provisions as of June 30, 2009.

In the normal course of business, we may be confronted with issues or events that may result in a contingent liability. These generally relate to lawsuits, claims, environmental actions or the action of various regulatory agencies. If necessary, management consults with counsel and other appropriate experts to assess any matters that arise. If, in management’s opinion, we have incurred a probable loss as set forth by accounting principles generally accepted in the United States, an estimate is made of the loss, and the appropriate accounting entries are reflected in our financial statements. After consultation with legal counsel, we do not anticipate that liabilities arising out of currently pending or threatened lawsuits and claims will have a material adverse effect on our financial position, results of operations or cash flows.

MPM Capital. On June 23, 2005, Intellect acquired certain intellectual property from Mindset Biopharmaceuticals (USA), Inc.  (“Mindset”).  All of the significant creditors and all but one of the shareholder groups of Mindset consented to the transaction.  That shareholder group was comprised of several entities associated with MPM Capital LLC.  During or about mid-2008, MPM Capital LLC and its affiliates (collectively “MPM”) and Intellect agreed to toll claims which MPM might wish to assert arising out of or in connection with the acquisition transaction until December 2008.  The parties subsequently extended the tolling agreement until June 2009.  The tolling agreement expired at the end of June 2009 without the initiation by MPM of any action or arbitration against Intellect. Although Intellect does not believe that MPM has any valid and timely claims against Intellect, there can be no assurance that MPM will not assert claims against Intellect in the future. 

Leases.  On August 1, 2005, Intellect USA entered into an operating lease for office space in New York City that extends through July 2010.  This agreement includes provisions for inflation-based rate adjustments and payments of certain operating expenses and property taxes.

On October 2, 2005, Intellect Israel entered into an operating lease for laboratory and office space in Israel.  This lease includes provisions for payments of certain operating expenses, property taxes and value added tax. Future minimum rental payments required under non-cancelable operating leases are as follows:

Year ended June 30,	Amount
2010	$	306,729
2011		166,482
2012		51,233
Total	$	524,444

During the fourth quarter of fiscal 2008, we effectively closed our Israeli laboratory due to a lack of funds.  In accordance with SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities”, we have included $62,167 of rent expense for our Israeli laboratory for the year ended June 30, 2008, representing the present value of the excess of our rental commitment in Israel through October 2011 over the estimated future sublease income from the laboratory during that period.  The lease is held by our wholly-owned subsidiary, Intellect Israel.  We are in the process of reaching an agreement with the landlord of the Israeli facility pursuant to which the lease will be terminated in exchange for surrender of amounts available under certain lease guarantees and an agreement by Intellect Israel to pay the landlord certain costs related to rewiring the facility, estimated at approximately $12,000.   Rent expense for our Israel lab for the year ended June 30, 2009 and 2008 was $162,357 and $230,994, respectively.

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We have sublet approximately 75% of our office space at our New York City office facility to Crenshaw Communications, Inc. A stockholder has given a personal guarantee to the landlord in New York for rental and other payments we may owe under the New York lease.  Such guarantee has been given for no consideration.

Total rent expense amounted to $309,661 and $373,624 for the years ended June 30, 2009 and June 30, 2008, respectively.

A stockholder has given a personal guarantee to the landlord in New York for rental and other payments we may owe under the New York lease such agreement has been given for no consideration.

Research and Development Agreements. We enter into various contracts with service providers in connection with our research and development and clinical trial activities. We have completed Phase I single dose and multiple dose studies to determine the safety and tolerability of OXIGON.  The studies were conducted in The Netherlands. Intellect USA engaged Kendle International B.V., one of the leading global clinical research organizations (“CRO”), to act as our CRO for these trials.  We incurred costs of approximately 1,300,000 euros (approximately $1,700,000) with Kendle during the year ended June 30, 2007 in connection with these trials. During the year ended June 30, 2008, we repaid Kendle $100,000. We did not incur any significant clinical trial costs during the fiscal years ended June 30, 2009 and 2008.

Employment Agreements. On January 15, 2007, we amended and restated our employment agreement with our Chief Executive Officer which we had entered into on June 30, 2005.  The Employment Agreement provides for a five year employment term and is automatically renewed on each anniversary of the date of the agreement for successive one-year terms unless either party terminates. No such notice of termination has been given by or to either party. Pursuant to the amended and restated agreement, and as agreed between Dr. Chain and the Compensation Committee of the Board of Directors, Dr. Chain will receive an annual base salary of not less than $300,000 per year commencing on the effective date of the amended agreement, and not less than $450,000 per year commencing upon a determination by the independent directors that the Company has been adequately financed. The directors have yet to make such a determination. In the event of a voluntary termination of the employment agreement by Intellect, the Chief Executive Officer is entitled to his annual base salary then in effect for 18 months after the date of termination.  The Chief Executive Officer is entitled to reimbursement of $10,000 per annum for life insurance.  In addition the Chief Executive Officer is entitled to an immediate grant of options in an amount such that taking into account his current holdings, his ownership interest in the company will increase to purchase 20% of outstanding common stock on a fully diluted basis upon adoption of a 2006 Stock Option Plan (see Note 14, Stock-Based Compensation Plans).

On January 15, 2007 we amended and restated our employment agreement with our Chief Financial Officer which we originally entered into on May 16, 2006. The Employment Agreement provides for a five year employment term and an annual base salary of no less than $300,000.  The Chief Financial Officer is also entitled to reimbursement for automobile expenses and life insurance of up to $28,000 annually. In the event of a voluntary termination of employment by Intellect, the Chief Financial officer is entitled to his annual base salary then in effect for 18 months after the date of termination.  In addition the Chief Financial Officer is entitled to an immediate grant of options to purchase 5% of the outstanding common stock of the company on a fully diluted basis upon adoption of a 2006 Stock Option Plan (see Note 14, Stock-Based Compensation Plans).

Note 14. Stock-Based Compensation Plans

Total compensation expense recorded during the year ended June 30, 2009 for share-based payment awards was $470,807, of which approximately $0.2 million is recorded in research and development and approximately $0.2 million is recorded in general and administrative expenses in the consolidated statement of operations for the year ended June 30, 2009.  At June 30, 2009, total unrecognized estimated compensation expense related to non-vested stock options granted prior to that date was approximately $7,168, which is expected to be recognized over a weighted-average period of .83 years. No tax benefit was realized due to a continued pattern of operating losses.

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Summary of Option Plans as of June 30, 2009:

	Year Ended June 30, 2009			Weighted Average Exercise Price		Instrinisic value		Weighted Average Remaining Contractual Life
Options outstanding at June 30, 2008		12,703,373		$	0.76	$	-
Granted		425,000		$	0.10
Cancelled/Forfeited		(736,366	)	$	0.74		-
Expired		(186,529	)	$	0.92
Balance at the end of period		12,205,478		$	0.74		-	7.11
Options excercisable at June 30, 2009		12,157,978		$	0.74		-	7.12
Options vested or expected to vest		12,205,478		$	0.74		-	7.11

The weighted-average grant date fair value of options granted during the year ended June 30, 2009 was $0.08.

A summary of the Company’s outstanding stock options at June 30, 2009 is as follows:

	Options Outstanding						Options Exercisable
Range of Exercise Price	Number Outstanding		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
$0.08 - $0.40		575,000		8.60	$	0.18		537,500	$	0.16
$0.41 - $0.78		11,630,478		7.04	$	0.77		11,620,478	$	0.77
		12,205,478		7.11		0.74		12,157,978		0.74

A summary of the status of the Company’s non-vested shares as of June 30, 2009, and changes during the year ended June 30, 2009, is presented below:

	Number of Awards			Weighted Average Exercise Price		Weighted Average Grant Date Fair Value		Weighted Average Remaining Amortization Period
Balance, beginning of the period		607,783		$	0.66	$	0.59
Granted		425,000		$	0.10	$	0.08
Vested		(751,407	)	$	0.35	$	0.31
Cancelled		(227,000	)	$	0.65	$	0.59
Forfeited		(6,876	)	$	1.76	$	1.60
Balance at June 30, 2009		47,500		$	0.43	$	0.34	0.68

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The following table sets forth the assumptions we used in calculating the fair value of stock options granted for the year ended June 30, 2009.

Calendar year  2009 grants	Risk-Free Interest Rate			Dividend Yield			Volitility Factor		Option Life (Years)
425,000		1.87	%		0	%		100		5-10

2005 Stock Option Plan. On April 25, 2005 our stockholders approved the adoption of the "2005 Employee, Director and Consultant Stock Option Plan" (the "2005 Stock Option Plan").  Under the 2005 Stock Option Plan, a maximum of 1,246,500 shares of our common stock are available for issuance.  The 2005 Stock Plan provides for the grant of either incentive stock options ("ISOs"), as defined by the Internal Revenue Code, or non-qualified stock options, which do not qualify as ISOs.  No options were granted in 2005.

On September 8, 2006, our Board of Directors approved the grant of 600,000 stock options to the members of our Board of Directors and 550,000 stock options to our Clinical and Scientific Advisory Board members and 80,000 stock options to two employees.  The grant was effective as of that date with a strike price of $0.65, the approximate fair value of stock on that date.  The stock options vest over a two year period and are exercisable through September 8, 2016.

In December 2006, a member of the board resigned, and as a result 70,833 unvested options were cancelled and 29,167 vested options expired.

On January 25, 2007, the Compensation Committee approved the grant of 86,334 stock options to employees of the Company from the 2005 Stock Option plan. The grant was effective as of that date with a strike price of $0.68.  The stock options vest over a two year period and are exercisable through January 25, 2017.  As a result of employee departures and terminations, 33,210 unvested options were cancelled and 13,124 vested options expired.

In February 2007, a member of our Clinical Advisory Board passed away and as result 31,250 unvested options were cancelled and 18,750 vested options expired.

On June 26, 2007 the Board voted to allow a director of the Company to cancel 100,000 stock options granted to him under the 2005 Plan and exchange such options for 100,000 stock options issued under the 2006 Plan. The sole purpose was to allow the director obtain beneficial Israeli tax treatment upon the sale of Common Stock obtained through the exercise of the stock options granted to him under the 2005 Plan as compensation for his service as a director of the Company.  The grant price and the terms are the same as the original grant. Therefore, no additional charge was recorded.

In March, 2008, a member of the board resigned, and as result 8,334 of unvested options were cancelled.

We did not grant any stock options from the 2005 Plan during the fiscal years ended June 30, 2009 and 2008. At June 30, 2009 and 2008, 274,834 and 234,824, respectively, options remain available for grant under the 2005 Plan.  The following table presents information relating to stock options under the 2005 Stock Option Plan as of June 30, 2009:

	Year Ended June 30, 2009			Weighted Average Exercise Price		Instrinisic value		Weighted Average Remaining Contractual Life
Options outstanding at June 30, 2008		1,011,666		$	0.65	$	-
Expired		(40,000	)	$	0.68
Balance at the end of period		971,666		$	0.65		-		4.29
Options excercisable at June 30, 2009		971,666		$	0.65		-		4.29
Options vested or expected to vest		971,666		$	0.65		-		4.29

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 2006 Stock Option Plan. In December 2006, our stockholders approved the adoption of the "2006 Employee, Director and Consultant Stock Plan" (the "2006 Stock Plan").  Under the 2006 Stock Plan, a maximum of 12,000,000 shares of our common stock are available for issuance under the Plan.  The 2006 Stock Plan provides for the grant of either incentive stock options ("ISOs"), as defined by the Internal Revenue Code, or non-qualified stock options, which do not qualify as ISOs.

On January 25, 2007 in conjunction with the reverse merger the board and our stockholders approved the total grant of 10,037,145 stock options to our Chief Executive Officer and Chief Financial Officer.  The grant is effective as of this date and the stock options vest immediately. The grant price of these options was determined to be $0.78 which was the approximate fair value of the stock on that date.

On March 7, 2007, our Board of Directors approved 1,275,043 stock options to our Israel employees (including the COO), 100,000 stock options to the head of our Scientific Advisory Board (“SAB”) and 55,000 stock options to US employees.  The grant of the Israel options was effective on April 25, 2007, which was the date that the Plan received all the necessary approvals and consents of the Israel Taxing Authority.  The grant price of these options was determined to be $0.78 which was the approximate fair value of the stock on that date. The options granted to our employees and the head of the SAB was effective as of March 7, 2007 and will vest over 2 years and be exercisable through March 7, 2017.

On June 26, 2007, the Board voted to allow a director of the Company to cancel 100,000 stock options granted to him under the 2005 Plan and exchange such options for 100,000 stock options issued under the 2006 Plan. The sole purpose was to allow the director to obtain beneficial Israeli tax treatment upon the sale of Common Stock obtained through the exercise of the stock options granted to him under the 2005 Plan as compensation for his service as a director of the Company. The replacement options vest at the same time and have the same strike price as the original options granted to him under the 2005 Plan.  Also, on this date, the Board granted 100,000 stock options to the newly appointed Audit Committee Chair, at a grant price of $3.10 which was the closing price of the stock as of that date. The stock options vest over a two year period and are exercisable through June 26, 2017.

On June 26, 2007 the Compensation Committee of the Board approved the grant of 18,500 stock options to two new Israeli employees of the Company.  The grant was effective as of that date with a strike price of $3.10, the closing stock price as of that date. The stock options vest over a two year period and are exercisable through June 26, 2017.

On March 19, 2008, the Board approved the grant of 50,000 stock options to a newly appointed member of the Company’s Clinical Advisory Board. The options vest pro-rata over a 24 month period and have a 5 year term. They were granted with an exercise price equal to the closing price of the Company’s common stock of $0.40 on the date of grant.

On March 19, 2008, the Board conditionally approved the grant of 100,000 stock options to Mr. Keane, the Audit Committee Chair, at a grant price of $0.40 per share, which was the closing price of the Company’s Common Stock on that date. The effectiveness of the grant was conditioned upon the cancellation of the same amount of options that had been previously granted to Mr. Keane on June 26, 2007 with an exercise price of $3.10 per share. The vesting terms of the new stock options match the vesting terms of the stock options granted on June 26, 2007. The new options are exercisable until June 26, 2017. Mr. Keane and the Company executed a cancellation agreement with respect to the June 26 options whereby those options were cancelled effective June 26, 2007.

On May 1, 2008 the Compensation Committee of the Board approved the grant of 358,500 stock options to our employees. The option exercise price is $0.64 per share, which was the closing price of our stock on the date of grant. The options vest over a three year period, with 10% of the total vesting on the date of grant.

On May 6, 2008 the Compensation Committee of the Board approved the grant of 10,000 stock options to certain of our employees. The option exercise price is $0.58 per share, which was the closing price of our stock on the date of grant. The options vest over a three year period, with 10% of the total vesting on the date of grant.

On June 19, 2008 the Board approved the grant of 42,500 stock options to one of our employees. The option exercise price is $0.74 per share, which was the closing price of our stock on the date of grant. The options vest over a three year period, with 10% of the total vesting on the date of grant.

On September 4, 2008, our Board of Directors unanimously voted in favor of an extension of the exercise period of the stock options held by former directors, Messrs. Eliezer Sandberg and David Woo. Under the extension period approved by the Board, the options will expire 5 years following the termination dates of March 19, 2008 in the case of Mr. Sandberg and March 20, 2008 in the case of Mr. Woo, respectively.

On February 10, 2009, our Board of Directors approved the grant of a total of 400,000 stock options to the independent members of our Board of Directors. The grant was effective as of February 10, 2009 with a strike price of $0.08, the closing price of the Company’s common stock on that date. The stock options vest in their entirety on the date of grant and are exercisable through February 10, 2019.

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On March 30, 2009, our Board of Directors approved the grant of 25,000 stock options to a consultant engaged by the Company to assist in research and development activities related to OXIGON. The grant was effective as of that date with a strike price of $0.35, the closing price of the Company’s common stock on that date. The stock options vest over a twelve month period and are exercisable through March 30, 2014.

As of June 30, 2009 and 2008, there are 766,188 and 308,293, respectively, stock options available for grant under the 2006 Stock Plan. The following tables present information relating to stock options under the plan as of June 30, 2009:

	Year Ended June 30, 2009			Weighted Average Exercise Price		Instrinisic value		Weighted Average Remaining Contractual Life
Options outstanding at June 30, 2008		11,691,707		$	0.77	$	-
Granted		425,000		$	0.10
Cancelled/Forfeited		(736,366	)	$	0.74		-
Expired		(146,529	)	$	0.94
Balance at the end of period		11,233,812		$	0.75		-		7.36
Options excercisable at March 31, 2009		11,186,312		$	0.75		-		7.37
Options vested or expected to vest		11,233,812		$	0.75		-		7.36

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Note 15. Per Share Data

The following table sets forth the information needed to compute basic and diluted earnings per share:

	Full Year Ended
	June 30, 2009		June 30, 2008
Basic EPS
Net income (loss) attributable to common stockholders, basic	$	1,846,764	$	19,625,103
Weighted average shares outstanding		30,843,873		30,876,324
Basic earnings (loss) earnings per share	$	0.06	$	0.64
Diluted EPS
Net income (loss) attributable to common stockholders, basic	$	1,846,764	$	19,625,103
Preferred stock dividends		488,973		490,312
Interest on convertible notes		1,058,629		3,889,026
Net income (loss) attributable to common stockholders, diluted	$	3,394,366	$	24,004,441
Weighted average shares outstanding		30,843,873		30,876,324
Dilutive effect of stock options		34,394		1,747,953
Dilutive effect of warrants		-		208,612
Dilutive effect of Series B preferred shares		4,593,091		4,593,091
Dilutive effect of convertible notes		6,224,957		4,913,534
Diluted weighted average shares outstanding		41,696,315		42,339,513
Diluted earnings (loss) per share	$	0.08	$	0.57

Note 16. Subsequent Events

In accordance with SFAS No. 165, we have evaluated any events or transactions occurring after June 30, 2009, the balance sheet date, through October 6, 2009, and note that there have been no such events or transactions that would require recognition or disclosure in the consolidated financial statements as of and for the fiscal quarter and fiscal year ended June 30, 2009, except as disclosed below.

On August 12, 2009, we issued and sold a 10% Senior Promissory Note (the “Note”) with a principal amount of $450,000, resulting in net proceeds of approximately $360,000. The Note was sold to an “accredited investor” (as defined in Section 2(15) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 501 promulgated thereunder) in an offering exempt from registration under Section 4(2) of the Securities Act and Rule 506 promulgated thereunder.

The Note bears interest at 10% annually and matures upon the earlier of 6 months from the date of the Note or the closing of an equity financing with gross proceeds to us of at least $1,125,000 (the “Liquidity Event”).  The payment and performance obligations of the Company under the Note are guaranteed by Margie Chassman, a principal shareholder of the Company.  In consideration of the guaranty provided by Ms. Chassman, we paid her a fee of $30,000.

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As additional consideration to repayment of the Note and interest in cash, the purchaser of the Note will receive at maturity or early repayment of the Note either (1) a number of shares of common stock, par value $0.001, of the Company (the “Shares”), equal to the quotient of the principal amount of the Note divided by 0.15; or (2) warrants to purchase a number of shares of common stock, par value $0.001, of the Company (the “Purchaser Warrants”), equal to the quotient of the principal amount of the Note divided by 0.15, at an exercise price equal to $1.75 per share, as adjusted upon the occurrence of certain events as set forth in the Purchaser Warrant. If the Liquidity Event occurs on or prior to the maturity date of the Note, the purchaser will receive Shares. If the Liquidity Event has not occurred on or prior to the maturity date of the Note, the purchaser will receive Purchaser Warrants.

The Purchaser Warrants, if issued, will entitle the holder to purchase shares of the Company’s common stock at a price of $1.75 per share. The number of shares issuable on exercise of the Purchaser Warrants is subject to adjustment for subdivision, combination, recapitalization, reclassification, exchange or substitution, as well as in the event of merger or sale of all or substantially all of our assets. The Purchaser Warrants also benefit from anti-dilution adjustments upon some issuances of shares of the Company’s common stock (or securities convertible into or exchangeable or exercisable for such stock). If the Company issues common stock (other than certain types of excluded stock or stock issued for the purposes of adjustment) at a price that is less than $1.75 (or if the Company issues rights, warrants or other securities having an exercise, conversion or exchange price that is less than $1.75), the exercise price of the Purchaser Warrants will be reduced (i) until the completion by the Company of financings providing cumulative gross proceeds of at least $10,000,000, involving the issuance of shares of Common Stock or securities convertible into or exchangeable or exercisable for shares of Common Stock, to a price equal to the issuance, conversion, exchange or exercise price, as applicable, of any such securities so issued and (ii) thereafter to a price determined by dividing (a) an amount equal to the sum of (A) the number of shares of Common Stock outstanding and shares of Common Stock issuable upon conversion or exchange of securities of the Company outstanding immediately prior to such issue or sale multiplied by the then existing Exercise Price and (B) the consideration, if any, received by the Company upon such issue or sale by (b) the total number of shares of Common Stock outstanding and shares of Common Stock issuable upon conversion or exchange of securities of the Company outstanding immediately after such issue or sale. Additional reductions of the exercise price of the Purchaser Warrants will be made if the Company issues securities at a price (or having an exercise, conversion or exchange price) less than the exercise price of the Purchaser Warrants at the time of such issuances.  The Purchaser Warrants carry piggyback registration rights whereby holders of Purchaser Warrants are entitled to compel the Company to include the common stock issuable pursuant to such holder’s Purchaser Warrants in each registration statement that the Company files other than registration statements which relate exclusively to an employee stock option, purchase, bonus or other benefit plan. Each Purchaser Warrant expires on the fifth anniversary of the date of its issuance.

Sandgrain Securities Inc. acted as placement agent for the offering of the Notes.  We paid to Sandgrain a commission of $45,000 (10% of the aggregate principal amount of the Notes sold) plus reimbursement of expenses.  We are obligated to issue to Sandgrain (or its designees) warrants (the “Sandgrain Warrants”) to purchase 750,000 shares of the Company’s common stock, exercisable for 5 years from their date of issuance.  The Sandgrain Warrants will be issued to Sandgrain (or its designees) at the time that we issue to purchasers of the Notes either the Shares or the Purchaser Warrants.  The exercise price of the Sandgrain Warrants will be $$0.15 per share if we issue Shares to the Purchasers or $1.75 per share if we issue Purchaser Warrants to the Purchasers.  The Sandgrain Warrants may be exercised on a cashless basis and will have registration, anti-dilution and other rights similar to the Purchaser Warrants.  In addition, we have agreed to extend the expiration date of warrants to purchase 485,714 shares of our common stock, which were issued to Sandgrain (or its designees) in July 2007 in connection with a previous financing transaction by the Company.  The expiration date of all such warrants will be extended from July 16, 2012 until the expiration date of the Sandgrain Warrants to be issued in connection with this offering of Notes.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.      CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We performed an evaluation under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of June 30, 2009. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within our company to disclose material information otherwise required to be set forth in our periodic reports.

Following the evaluation described above, our management, including our chief executive and chief financial officer, concluded that based on the evaluation, our disclosure controls and procedures were effective as of the date of the period covered by this annual report.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Under the supervision and with the participation of our management, including our chief executive officer and our chief financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control — Integrated Framework, our management concluded that our internal control over financial reporting was effective as of June 30, 2009.

Changes in Internal Controls Over Financial Reporting and Management’s Remediation Initiatives

There has been no change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended June 30, 2009 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

There were, however, changes in our internal control over financial reporting during the year ended June 30, 2009 in order to remediate a previously identified material weakness. As previously reported in our Annual Report on Form 10KSB/A for the fiscal year ended June 30, 2008 filed on November 6, 2008, amended by a Form 10-KSB/A filed on November 7, 2008, further amended by a Form 10-KSB/A filed on February 26, 2009, and further amended by a Form 10-K/A filed on March 27, 2009, our management had previously identified a material weakness in our internal control over financial reporting, specifically, that we had not maintained a sufficient complement of personnel with the appropriate level of knowledge, experience and training in the application of accounting principles generally accepted in the United States (referred to as GAAP) and in internal control over financial reporting commensurate with our financial reporting obligations under the Exchange Act to properly review and monitor our significant control activities and to assist in the preparation of our required financial reports on a timely basis. We have developed a plan to remediate the material weakness, and pursuant to that plan, we have hired an additional employee on a part time basis who is trained in the preparation of financial statements in accordance with GAAP and who can supplement the experience of our current personnel that is necessary to ensure that we have in place appropriate internal control over financial reporting. Although we believe that, following these remediation efforts, our internal control over financial reporting is effective as of June 30, 2009, there can be no assurance that such action alone will be sufficient or effective.

Report of Independent Registered Public Accounting Firm

This annual report does not include an attestation report of our registered public accounting firm, Paritz and Company, regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report

ITEM 9B.      OTHER INFORMATION

          None.

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PART III

ITEM 10.       DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(a) OF THE EXCHAGE ACT.

Directors and Executive Officers

The following table sets forth the name, age and position of our directors, executive officers and significant employees as of the filing date of this report on Form 10-KSB.  All of our directors hold office until they resign or are removed from office in accordance with out bylaws.

Name	Age	Title
Daniel G. Chain, Ph.D.	52	Chief Executive Officer, Chairman and Director
Elliot M. Maza, J.D., C.P.A.	54	President and Chief Financial Officer and Director
Kelvin Davies, Ph.D.	57	Director
William P. Keane, M.B.A.	54	Director
Harvey L. Kellman, M.B.A.	65	Director
Kathleen P. Mullinix, Ph.D.	64	Director

Daniel G. Chain, Ph.D., Chief Executive Officer. Dr. Chain formed Intellect in April 2005 and has served as our Chief Executive Officer since October 2005. In July 1999, Dr. Chain founded Mindset Biopharmaceuticals USA, Inc., a biopharmaceutical development stage company, and Mindset Ltd., an Israeli research and development subsidiary of Mindset Biopharmaceuticals USA. In 2001, Dr. Chain founded MindGenix Inc., a contract drug testing company, as a subsidiary of Mindset Biopharmaceuticals USA. He served as Chief Executive Officer of Mindset Biopharmaceuticals USA from July 1999 until October 2005, when he resigned as the Chief Executive Officer of Mindset Biopharmaceuticals USA and joined Intellect. Dr. Chain continues to serve Mindset BioPharmaceuticals USA and MindGenix as president of both companies. Under his employment agreement with us, he is permitted to spend up to 5% of his time in his capacity of president of Mindset Biopharmaceuticals and Mindgenix.

Dr. Chain is the author of several scientific research publications in peer-reviewed journals in various fields. Dr. Chain’s interest in biology of the human brain led to his invention of antibody-based therapies being developed for the prevention and treatment of Alzheimer’s disease and to the invention of insulin sensitizers being developed to increase glucose utilization in the aging brain as a method to improve age-related cognitive impairment. Dr. Chain is a member of the Society for Free Radical Biology and Medicine, a member of the Royal Society of Medicine and the Society for Neuroscience. Dr. Chain obtained his B.Sc., with honors, in Biochemistry from the Institute of Biology in London and obtained his Ph.D. in Biochemistry from the Weizmann Institute of Science in Israel. He trained as a post-doctoral research fellow at the Center for Neurobiology and Behavior at Columbia University College of Physicians and Surgeons in New York.

Elliot M. Maza, J.D., C.P.A., President and Chief Financial Officer.  Mr. Maza has served as our Executive Vice President and Chief Financial Officer from May 2006 to March 2007 when he was promoted to President and Chief Financial Officer, which positions he currently holds.  From December 2003 to May 2006 Mr. Maza was Chief Financial Officer of Emisphere Technologies, Inc., a publicly held biopharmaceutical company specializing in oral drug delivery. He was a partner at Ernst and Young LLP from March 1999 to December 2003 and served as a Vice President at Goldman Sachs, Inc., JP Morgan Securities, Inc. and Bankers Trust Securities, Inc. at various times during March 1991 to March 1999. Mr. Maza was an investment banking associate at Goldman Sachs, Inc. from April 1989 to March 1991. Mr. Maza practiced law at Sullivan and Cromwell in New York from September 1985 to April 1989. Mr. Maza serves on the Board of Directors and is Chairman of the Audit Committee of AXM Pharmaceuticals, Inc., a publicly traded biopharmaceutical company focused on developing proprietary therapies for the treatment of cancer, and Apollo Solar Energy, Inc., a Chinese producer of material used to manufacture solar cells. Mr. Maza received his B.A. degree from Touro College in New York and his J.D. degree from the University of Pennsylvania Law School. He is a licensed C.P.A. in the states of New Jersey and New York and is a member of the New York State Bar.

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Kelvin Davies, Ph.D., Director and Chairman of Scientific Advisory Board. Dr. Davies has served on our Board of Directors since April 2006. He is also the Chairman of our Scientific Advisory Board, in which capacity he has served since December 2005. Dr. Davies is the James E. Birren Chair in Gerontology and is a Professor of Molecular and Computational Biology and Associate Dean for Research at the University of Southern California. Dr. Davies’ research centers on the role of free radicals and oxidative stress in biology. Dr. Davies became a Fellow of the Oxygen Society in 1989, a Fellow of the American Association for the Advancement of Science in 1996, a National Parkinson’s Foundation Fellow in 1996, and a Fellow of the Gerontological Society of America in 2003. He was President of the Oxygen Society from 1992 to 1995, President of the Oxygen Club of California from 2002 to 2004, and President of the International Society for Free Radical Research from 2003 to 2005. Dr. Davies began his undergraduate studies in the UK, at Liverpool and Lancaster Universities, and continued with a B.S. and M.S. in Physiology and Biophysics from the University of Wisconsin, and a C.Phil. and Ph.D. in Biochemistry and Physiology from the University of California-Berkeley. Dr. Davies undertook postdoctoral studies at Harvard Medical School/Harvard University, and has held faculty positions at the Albany Medical College and the University of Southern California (current). Dr. Davies has received medals and honorary degrees from several academic institutions, including the University of Moscow (Russia), the University of Gdansk (Poland), and the University of Buenos Aires (Argentina). Among other honors and awards, Dr. Davies received the Harwood Belding Award from the American Physiological Society and the Lifetime Scientific Achievement Award from the Society for free Radical Biology & Medicine in 2006.

William P. Keane, M.B.A., Director and Chairman of the Audit Committee. Mr. Keane has served on our Board of Directors since June 2007 and is Chair of the Audit Committee.  Since 2005 Mr. Keane has been a consultant.  From 2002 until 2005, Mr. Keane was the Chief Financial Officer and Corporate Secretary at Genta Incorporated, a company engaged in the identification, development, and commercialization of drugs for the treatment of cancer and related diseases. Mr. Keane has served as Vice President of Sourcing, Strategy and Operations Effectiveness for Bristol-Myers Squibb, CFO for Covance Biotechnology Services Inc., Vice President of Finance, Global Pharmaceutical Manufacturing for Warner-Lambert and Director of Finance and Administration for the UK pharmaceuticals business of Novartis AG. Mr. Keane currently is a member of the Board of Directors and Chairman of the Audit Committee of Salix Pharmaceuticals, a leading specialty pharmaceutical company providing products to gastroenterologists and their patients. Mr. Keane received an MBA in Finance from Rutgers University School of Management and a BA in Microbiology from Rutgers College.

Harvey L. Kellman, M.B.A., Director. Mr. Kellman has served on our board of directors since April 2006 and is Chair of the Compensation Committee. Mr. Kellman has been the Managing Director of Wind River Partners, L.L.C., a business consulting firm,  since 1996. He has served as a Founding Director and Executive Vice President of BioMimetic Therapeutics, Inc. (formerly BioMimetic Pharmaceuticals, Inc.) from 2000 to 2004, a Director of Cardiome Pharma Corporation (formerly Nortran Pharmaceuticals, Inc.) and a Director of Inflazyme Pharmaceuticals Ltd from April 1996 to April 2004. From January 1969 to April 2004, Mr. Kellman was the co-founder and/or senior executive at the following companies: BioMimetic Therapeutics, Inc., Sheffield Medical Technologies, Inc., Redox Pharmaceutical Corporation, DNA Pharmaceuticals, Inc., CIBA Pharmaceuticals (a division of CIBA-Geigy Corporation (now Novartis International)), Bausch & Lomb Soflens and Scientific Optical Products Divisions, G. D. Searle & Co, Standard Oil Company (Indiana), and Amoco. Mr. Kellman received his B.Sc. from Purdue University in Indiana, his M.Sc. degree from Illinois Institute of Technology, and his M.B.A. from the Kellogg School at Northwestern University in Illinois.

Kathleen P. Mullinix, Ph.D., Director. Dr. Mullinix has served on our board of directors since April 2006 and is Chair of the Nominating and Governance Committee. From September 2006 until June 2008, Dr. Mullinix was the President and Chief Executive Officer of WellGen, Inc., a biotechnology company using nutrigenomics to discover and develop food ingredients for wellness products. Prior to joining WellGen, Dr. Mullinix advised investors on biotechnology and pharmaceutical business opportunities with her company Kathleen P. Mullinix & Associates, which she founded in December 2002. In October 1987, Dr. Mullinix joined Synaptic Pharmaceutical Corporation as a founder and served as its chairman, CEO and president until shortly before it was sold to Lundbeck Pharmaceuticals in December 2002. Dr. Mullinix served as Vice Provost of Columbia University from July 1981 to October 1987. Dr. Mullinix worked at the National Institute of Health in Bethesda, Maryland as a Research Chemist and as Assistant Director of the Intramural Program from September 1972 until July 1981. She obtained her B.A. in Chemistry from Trinity College in Washington, D.C., her Ph.D. in Chemical Biology from Columbia University in New York and was a National Institutes of Health Postdoctoral Fellow at Harvard University.

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Other Information About Directors and Executive Officers

Our executive officers and directors are not associated by family relationships, however, Dr. Benjamin Chain, who serves as a member of our Scientific Advisory Board is the brother of Dr. Daniel Chain our Chief Executive Officer and Chairman.  During the past five years, none of our executive officers or directors has been involved in a pending criminal proceeding, nor convicted in a criminal proceeding (excluding traffic violations and other minor offenses); subject to any order, judgments or decree permanently or temporarily enjoining, banning, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities nor found by a court, the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law.

Director Compensation

All of our directors hold office until they resign or are removed from office in accordance with our bylaws.

Our non-employee directors are entitled to receive a directors’ fee of $2,000 per month, in addition to reimbursement for any expenses incurred by them in attending Board meetings. We have entered into indemnification agreements with each of our directors, which provides, among other things that we will indemnify each director, under certain circumstances, for defense expenses, damages, judgments, fines and settlements incurred by the director in connection with actions or proceedings to which he or she may be a party as a result of his or her position as a member of our Board, and otherwise to the full extent permitted under our bylaws and state law.

Presented below in tabular and narrative format is the director compensation information for our current directors for the year ended June 30, 2009. The disclosure of option grants in the below table reflects option grants by Intellect under its 2005 and 2006 Equity Incentive Plans.

Name	Fees Earned or Paid in Cash ($)		Stock awards during the year		Option awards during the year ($ value)		All other compensation		Total
Kelvin Davies(1)		33,000		-	$	7,172		-	$	40,172
William P. Keane (2)		30,000		-	$	7,172		-	$	37,172
Harvey Kellman (3)		33,000		-	$	7,172		-	$	40,172
Kathleen Mullinix (4)		24,000		-	$	7,172		-	$	31,172

(1)           Dr. Davies’ compensation includes $1,500 for each of six months for his services as Chairman of the Scientific Advisory Board. Effective Jan 1, 2008, Dr. Davies agreed to forego incremental compensation for such services due to financial constraints at the Company. Dr. Davies received an additional 100,000 stock options on March 7, 2007 at a grant price of $0.78 in consideration for his services as Chairman of the Scientific Advisory Board. Total stock and option awards for Dr. Davies as of the year ended June 30, 2009 is 300,000 option awards.

(2)           Mr. Keane was appointed to the Board effective June 26, 2007 and was granted stock options to purchase 100,000 shares of our common stock.  The shares vest monthly at a rate of one-twenty fourth (1/24) of the total number granted. Mr. Keane’s compensation is $2,500 per month to reflect his added responsibilities as Chairman of the Audit Committee. Total stock and option awards for Mr. Keane as of the year ended June 30, 2009 is 200,000 option awards.

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(3)           Mr. Kellman’s compensation includes $1,500 for each of six months for his services as a consultant. Effective Jan 1, 2008, Mr. Kellman agreed to forego incremental compensation for such services due to financial constraints at the Company. We granted Mr. Kellman options to purchase 100,000 shares of our common stock on September 8, 2006. As of the date of the grant, 16,667 options were vested immediately and the remainder vests monthly over 20 months. The value of each option was determined to be $0.65 per share by an independent valuation consultant. We assumed the options in connection with the Merger. Total stock and option awards for Mr. Kellman as of the year ended June 30, 2009 is 200,000 option awards.

(4)Total stock and option awards for Ms. Mullinix as of the year ended June 30, 2009 is 200,000 option awards.

Consulting Agreement with Harvey Kellman. On July 1, 2005, we entered into a consulting agreement with Harvey Kellman, who served as a director of Intellect prior to the Merger and who became one of our directors effective upon the Merger. Pursuant to this agreement Mr. Kellman agrees to allocate a reasonable amount of his business time to provide to us certain services, including, without limitation, services related to strategic planning, organizing and managing our business operations, obtaining additional financing for us, engaging other corporate partners to enter into related collaborative arrangements with us and such other services as we may reasonably request or require from time to time. The agreement is for an initial term of three years and automatically renews each year thereafter unless terminated by either party by written notice given at least 60 days prior to the expiration of the agreement. Pursuant to the agreement, which has been amended and which we assumed in connection with the Merger, Mr. Kellman is entitled to a consulting fee of $3,500 per month through January 1, 2008, which includes his fee for serving as a member of our board of directors. From January 1, 2008 onwards, Mr. Kellman is entitled to receive $2,000 per month as a director. In addition, under the consulting agreement, Mr. Kellman is eligible for reimbursement of all ordinary and reasonable out-of-pocket business expenses that are reasonably incurred by Mr. Kellman.

Consulting Agreement with Kelvin Davies.On December 1, 2005, we entered into a consulting agreement with Kelvin Davies, who served as a director of Intellect prior to the Merger and who became one of our directors effective upon the Merger. Pursuant to this agreement, Dr. Davies agrees to serve as the Chairman of our Scientific Advisory Board. Pursuant to the agreement which has been amended and which we assumed in connection with the Merger, Dr. Davies is entitled to a consulting fee of $3,500 per month through January 1, 2008, which includes his fee for serving as a member of our board of directors, and a grant of 100,000 stock options. From January 1, 2008 onwards, Dr. Davies is entitled to receive $2,000 per month as a director. In addition, under the consulting agreement, Dr. Davies is eligible for reimbursement of all ordinary and reasonable out-of-pocket business expenses that are reasonably incurred by Dr. Davies and a per diem payment of $2,500 for Scientific Advisory Board meetings. The agreement is in effect until terminated by either party with 90 days notice.

Scientific Advisory Board.

Our scientific advisory board consists of leading scientists with specific expertise in the field of Alzheimer’s disease and other neurodegenerative diseases. The scientific advisory board generally advises us concerning long-term scientific planning, research and development, and also evaluates our research programs, recommends personnel to us and advises us on specific scientific and technical issues.

Kelvin Davies, Ph.D., Director and Chairman of Scientific Advisory Board (see above).

Benjamin Chain, Ph.D. Dr. Chain has been a member of the Scientific Advisory Board since its formation in April 2006. Since 1996, he has been the Professor of Immunology at University College of London, where he previously held positions as Senior Lecturer in the Department of Biology and Immunology from 1990-1993 and Reader in Immunology in the Department of Immunology from 1993-1996. Dr. Chain has a B.A. in Natural Sciences and a Ph.D. in Zoology from the University of Cambridge in the United Kingdom. Dr. Chain obtained his postdoctoral training at the Sloan Kettering Institute in New York and in the Department of Zoology at UCL in London. Dr. Chain is the inventor of our RECALL-VAX technology platform. Dr. Chain is the brother of Dr. Daniel G. Chain, our Chief Executive Officer and Chairman.

Zelig Eshhar, Ph.D. Dr. Eshhar has been a member of the Scientific Advisory Board since its formation in April 2006. Dr. Eshhar has held several positions at the Weizmann Institute of Science in Israel since 1976, most recently as Chairman of the Department of Immunology from 2002 through 2005. Dr. Eshhar serves on several editorial boards, including Cancer Gene Therapy, Human Gene Therapy, Gene Therapy, Expert Opinion on Therapeutics, European Journal of Immunology and the Journal of Gene Medicine. Dr. Eshhar obtained his B.Sc. in Biochemistry and Microbiology and his M.Sc. in Biochemistry from the Hebrew University. He obtained his Ph.D. in the Department of Immunology from the Weizmann Institute of Science. He was a Research Fellow in the Department of Pathology at Harvard Medical School from 1973 to 1976 and the Department of Chemical Immunology at the Weizmann Institute of Science in Israel from 1976 to 1978.

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Alfred L. Goldberg, Ph.D. Dr. Goldberg has been a member of the Scientific Advisory Board since its formation in April 2006. Dr. Goldberg currently is Professor of Cell Biology at the Harvard Medical School. He has held academic positions in numerous institutes, since joining the Harvard Medical School as Assistant Professor of Physiology in 1969, including visiting Professor at the University of California-Berkeley in 1976 and Visiting Professor at the Institute Pasteur of the University of Paris in 1995. Dr. Goldberg has served on numerous advisory boards of companies, including Biogen Inc., Tanox Inc., ProScript Network Inc., Point Therapeutics, Inc. and the Michael J. Fox Foundation. Throughout his career, he has served on many editorial boards, including the Journal of Biological Chemistry, the New England Journal of Medicine, and Basic and Applied Myology. Dr. Goldberg obtained his A.B. degree in Biochemistry from Harvard University in 1963 and his Ph.D. in Physiology from Harvard University in 1968.

Donald L. Price, M.D. Dr. Price has been a member of the Scientific Advisory Board since its formation in April 2006. After training in neurology, neuropathology, and neurobiology in Boston, he was appointed Assistant Professor of Neurology and Pathology at Harvard Medical School and Director of the Neuropathology Laboratory at Boston City Hospital. Since 1971, he has been on the faculty at the Johns Hopkins Medical Institutions (JHMI) where he is Professor in the Departments of Pathology and Neurology (since 1978) and Neuroscience (since 1983). He is the founding Director of the Alzheimer’s Disease Research Center at Hopkins. Dr. Price’s research focuses on: human neurodegenerative diseases (Alzheimer’s disease, amyotrophic lateral sclerosis, and parkinsonism); the generation and characterization of genetically- engineered models of these diseases; the identification of therapeutic targets for these illnesses; and experimental treatments in model systems. The recipient of many awards for his research, Dr. Price is a Past President of the Society for Neuroscience and is a member of the Institute of Medicine (National Academy of Science).

Bruce Dobkin, M.D. Dr. Dobkin has been a member of the Scientific Advisory Board since its formation in April 2006. Dr. Dobkin has been the Professor of Clinical Neurology, UCLA School of Medicine since 1989; the Co-director, UCLA Stroke Center, since 1994; the Medical Director, UCLA Neurologic Rehabilitation and Research Unit, since 1994; and the Director, Neurologic Rehabilitation Program, Department of Neurology, UCLA, since 1988. Previously, Dr. Dobkin served as Associate Director, UCLA Department of Neurology Outpatient Clinic (1989 – 1991); Director, UCLA Cerebrovascular Service (1982-88); Medical Director, Stroke/Neurologic Rehabilitation Unit, Daniel Freeman Memorial Hospital (1977-89); Director, UCLA General Internal Medicine resident training program in neurology (1977-87); and Assistant, Associate, then Professor of Neurology and of Medicine, UCLA (1977-89). Dr. Dobkin received his B.A. in Chemistry from Hamilton College, Clinton, New York, and his M.D. from Temple University School of Medicine, Philadelphia, Pennsylvania.

Cheryl Fitzer-Attas, Ph.D. Dr. Fitzer-Attas has been a member of the Scientific Advisory Board since its formation in April 2006. Currently, Dr. Fitzer-Attas is Associate Director of Scientific Affairs in the Global Marketing Division for Teva Pharmaceutical Industries, Ltd. After leaving academia in 1998, Dr. Fitzer-Attas has held varied positions in the biotechnology and pharmaceutical sectors including Senior Scientist and Group Leader at Bio-Technology General (Israel) Ltd. (now Savient Pharmaceuticals, Inc.) from 1998 to 2001, and Vice President, Research & Development at Mindset BioPharmaceuticals Ltd. from 2001 to 2004. Dr. Fitzer-Attas received her Ph.D. in Biology from the Weizmann Institute of Science.

Clinical Advisory Board.

Our Clinical Advisory Board is comprised of renowned experts in the field and is intended to help guide us in our drug discovery and development programs. The Board focuses on providing guidance and advice to Intellect in many areas involving the company’s current and planned clinical studies.

Paul Bendheim, M.D. Chairman. Dr. Bendheim has been the chairman of the Clinical Advisory Board since its formation in April 2006. Dr. Bendheim is Chairman and Founder, and Chief Medical and Scientific Officer of BrainSavers LLC, a company he founded in 2004. Also, since 2004, he has served as Medical Director of Development and a Research Neurologist of the Banner Alzheimer’s Institute of Banner Health located at Banner Good Samaritan Medical Center in Phoenix, Arizona. Prior to founding BrainSavers and his appointment at the Banner Good Samaritan Medical Center, Dr. Bendheim was executive vice president and chief medical officer of Mindset BioPharmaceuticals, Inc. from 1999 to 2003; medical director of the Copaxone Division of Teva Pharmaceuticals Industries, Ltd. from 1995 to 1997; and Head of the Laboratory of Neurodegenerative Diseases and the Geriatric Neurology Clinic at the NYS Institute for Basic Research from 1985 to 1991. Dr. Bendheim obtained his B.A. from Pomona College and his M.D. degree from the University of Arizona, College of Medicine.

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Steven H. Ferris, Ph.D. Dr. Ferris has been a member of the Scientific Advisory Board since its formation in April 2006. He has held several academic appointments in the department of Psychiatry at the NYU School of Medicine since 1975, where he currently is the Gerald J. & Dorothy R. Friedman Professor of the NYU Alzheimer’s Disease Center. Since 1973, Dr. Ferris has served as the Executive Director of the Aging and Dementia Research Center, and since 2001, has served as the Executive Director, Silberstein Institute for Aging and Dementia, at the NYU School of Medicine. He is currently directing a national, NIH consortium study designed to improve the efficiency of primary prevention trials for Alzheimer’s disease. Dr. Ferris obtained his B.A. in Psychology at Rensselaer Polytechnic Institute in New York, his M.A. in Psychology at Queens College in New York, and his Ph.D. in Experimental Psychology at the City University of New York.

Douglas R. Galasko, M.D. Dr. Galasko has been a member of the Clinical Advisory Board since its formation in April 2006. Since 1990, Dr. Galasko has been a member of the Department of Neurosciences at the School of Medicine, University of California-San Diego and has been a Professor in Residence since 2000. Dr. Galasko has been Attending Physician, Department of Neurology, University of California, San Diego since 1987 and Staff Physician, Neurology Service, Veterans Affairs Medical Center, San Diego, CA, since 1990. His specific areas of investigation include biological markers and genetic risk factors for Alzheimer’s disease, heterogeneity in Alzheimer’s Disease, and subtypes and variants. Dr. Galasko obtained his M.D. degree from University of the Witwatersrand Medical School, Johannesburg, South Africa.

Eric Reiman, M.D. Dr. Reiman has been a member of the Clinical Advisory Board since its formation in April 2006. Dr. Reiman has served as the Executive Director of the Banner Alzheimer’s Institute of Banner Health located at Banner Good Samaritan Medical Center in Phoenix, Arizona since 2005; Adjunct Professor, Department of Biomedical Infomatics at Arizona State University since 2006; Clinical Director of the Neurogenomics Program at Translational Genomics Research Institute (TGen), Phoenix, Arizona, since 2003; Director, Arizona Alzheimer’s Disease Consortium since 1998; Professor, Department of Psychiatry, and Associate Head for Research and Development, Department of Psychiatry, University of Arizona College of Medicine, Tucson, Arizona, since 1998 and 1997, respectively. Dr. Reiman obtained his B.S. and M.D. degrees from Duke University. He did his residency at Duke University and Washington University Schools of Medicine.

Dr. Thomas M. Wisniewski, M.D. Dr. Wisniewski is Professor of Neurology, Pathology and Psychiatry at New York University Medical Center and is a board certified Neurologist and Neuropathologist. Also, he is the Director of the Memory and Dementia Disorders Center and the Director of the Neuropathology Core of the New York University Alzheimer's Disease Center.  Dr. Wisniewski has an active research laboratory focusing on neurodegenerative disorders, in particular the mechanisms which drive amyloid deposition in Alzheimer’s and prion related diseases.  His work has led to over 150 peer-reviewed publications. Dr. Wisniewski obtained his M.D. from Kings College School of Medicine in London. He was a resident in Neurology at New York University and in Neuropathology at Columbia-Presbyterian.

Scientific Advisory Board and Clinical Advisory Board Compensation

Each member of our Scientific Advisory Board and Clinical Advisory Board receives per diem fees of $2,500 for each board meeting attended in person, 50,000 options that vest over 24 months and reimbursement for pre-approved travel expenses. In September 2006, Paul Bendheim, Chairman of our Clinical Advisory Board, and Kelvin Davies, Chairman of our Scientific Advisory Board, each received 100,000 options that vest ratably over 24 months. All members of our Scientific Advisory Board and Clinical Advisory Board hold other positions and devote a limited amount of time to our company.

Board Committees and Composition

Although we are not currently a listed issuer, as defined by applicable SEC rules, if our common stock were listed on Nasdaq, we believe that a majority of the members of our Board would qualify as independent under Nasdaq’s marketplace rules regarding director independence.  From time to time the Board appoints and empowers committees to carry out specific functions on behalf of the Board. The following describes the current committees of the Board and their members:

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Audit Committee

Our Audit Committee consists of Messrs. Keane (Chairman), Kellman and Ms. Mullinix. Our Board has instructed the Audit Committee to meet periodically with our management and independent accountants to, among other things, review the results of the annual audit and quarterly reviews and discuss the financial statements, select the independent accountants to be retained, and receive and consider the accountants’ comments as to controls, adequacy of staff and management performance and procedures in connection with audit and financial controls. Each of the members of the Audit Committee of the Board is “independent” within the meaning of Rule 10A-3 of the Exchange Act, and each of the members is able to read and understand fundamental financial statements.  While we are not currently a listed issuer, as defined by applicable SEC rules, if our common stock were listed on Nasdaq, we believe that each of the members of our Audit Committee would qualify as independent under Nasdaq’s marketplace rules regarding the independence of directors serving on audit committees.  In addition, the Board has determined that Mr. Keane meets the SEC’s definition of an “audit committee financial expert.” The Audit Committee Charter is available on our website, located at http://www.intellectns.com.

Compensation Committee

Our Compensation Committee consists of Messrs. Kellman (Chairman), Keane and Dr. Davies. The Compensation Committee determines the salaries and incentive compensation of our officers and provides recommendations for the salaries and incentive compensation of our other employees. The Compensation Committee also administers our stock incentive and stock option plans. Each of the members of the Compensation Committee of the Board is independent within the rules of the SEC. While we are not currently a listed issuer, as defined by applicable SEC rules, if our common stock were listed on Nasdaq, we believe that each of the members of our Compensation Committee would qualify as independent under Nasdaq’s marketplace rules regarding director independence.  The Compensation Committee Charter is available on our website, located at http://www.intellectns.com.

Nominating and Governance Committee

Our Nominating and Governance Committee consists of Ms. Mullinix (Chairman) and Messrs. Keane and Kellman. The Nominating and Governance Committee identifies individuals who are qualified to become members of the Board, consistent with criteria approved by the Board, selects, or recommends for the Board’s selection, the director nominees for each annual meeting of stockholders, develops and recommends to the Board a set of corporate governance principles applicable to us, and oversees the annual evaluation of the Board and our management. The Nominating and Governance Committee is also authorized to review related-party transactions for potential conflicts of interest. Each of the members of the Nominating and Corporate Governance Committee of the Board is independent within the rules of the SEC. While we are not currently a listed issuer, as defined by applicable SEC rules, if our common stock were listed on Nasdaq, we believe that each of the members of our Nominating and Governance Committee would qualify as independent under Nasdaq’s marketplace rules regarding director independence.  The Nominating and Corporate Governance Committee Charter is available on our website, located at http://www.intellectns.com.

Code of Ethics

Our Board has adopted a Code of Ethics that applies to our Chief Executive Officer and our Chief Financial Officer as well as to our other senior management and senior financial staff. Our Code of Ethics complies with the requirements imposed by the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations issued thereunder for codes of ethics applicable to such officers. Our Code of Ethics is available, and is incorporated herein by reference, on our website, located at http://www.intellectns.com.

Item 11. Executive Compensation.

Summary Compensation Table

The following table sets forth certain information about the compensation paid or accrued to the persons who served as our Chief Executive Officer and all other executive officers during the last completed fiscal year whose total compensation exceeded $100,000 for that year (the “named executive officers”).

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Summary Compensation Table - 2009

						Option		All Other
		Salary		Bonus		Awards		Compensation
Name	Year	($)		($)		($)		($)			Total
Daniel Chain, Chief Executive Officer and Chairman of the Board of Directors	2008		275,000		-		-		11,000	(A)		286,000
	2009		249,999		-		-		16,895	(B)		266,894
Elliot Maza, President, Chief Financial Officer and Director	2008		270,192		-		-		37,718	(C)		307,910
	2009		266,923		-		-		38,020	(D)		304,943

(A)           Matching contribution made under a defined contribution plan of $11,000.

(B)           Includes matching contribution made under a defined contribution plan of $10,000 and payment of life insurance premiums of $6,895.

(C)           Includes the following benefits:

· Payment of life insurance premiums of $15,190.

· Matching contribution made under a defined contribution plan of $10,808

· Reimbursed auto expenses of $11,120

(D)           Includes the following benefits: Payment of life insurance premiums of $15,900; matching contribution made under a defined contribution plan of $11,000; and reimbursed auto expenses of $11,120

Employment Agreements

Dr. Daniel G. Chain. In connection with the Merger, we approved an amended and restated employment agreement with Dr. Chain, which Intellect had entered into prior to the merger. The amendment and restatement was effective as of January 15, 2007. Prior to the amended and restated agreement, Dr. Chain’s annual compensation included a salary of $250,000 and a right to receive an annual bonus as agreed to between the parties (which bonus Dr. Chain agreed to forego in anticipation of the amended and restated agreement). The original agreement had a term of three years and was terminable for cause during such term.

Under the terms of the amended and restated agreement, Dr. Chain agreed to continue as Intellect’s Chief Executive Officer and Chairman of the Board and as a result of the merger he became our Chief Executive Officer and Chairman of the Board. Dr. Chain is permitted to continue as President of Mindset and Mindgenix provided that he spends no more than 5% of his time in such capacity. Pursuant to the amended and restated agreement, and as agreed between Dr. Chain and the Compensation Committee of the Board, Dr. Chain will receive an annual base salary of not less than $300,000 per year commencing on the effective date of the amended agreement, and not less than $450,000 per year commencing upon a determination by the independent directors that the Company has been adequately financed. Dr. Chain also is entitled to reimbursement of all ordinary and reasonable out-of-pocket business expenses he incurs. Dr. Chain is eligible to participate in an annual incentive plan which we are required to establish by July 13, 2007 and is entitled to reimbursement of up to $10,000 for individual life insurance annually. During 2009, Dr. Chain voluntarily accepted a reduction in salary to $250,000 because of the weak financial condition of the Company. Under the amended agreement, Dr. Chain is entitled to receive a grant of stock options in an amount that when combined with his existing shares, will increase his ownership interest to 20% of our outstanding shares of common stock on a fully diluted basis. These options were fully granted on January 25, 2007 and were fully vested on date of grant. The agreement also provides that Dr. Chain is entitled to participate in pension and welfare plans as are made available to senior level executives and six weeks vacation.

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The agreement is for an initial term ending November 30, 2011 and automatically renews each year thereafter unless terminated by either party by written notice given at least 180 days prior to the expiration of the agreement. We may terminate the agreement for cause (as defined in the amended and restated employment agreement).

If we terminate Dr. Chain’s employment without cause or if Dr. Chain terminates his employment for good reason (as defined in the agreement), we will, in addition to paying him earned and unpaid salary, vacation pay and other benefits as well as incentive awards earned as of December 31 of the prior year, be obligated to continue Dr. Chain’s benefits and pay Dr. Chain a monthly payment for 18 months from the date of his termination equal to one-twelfth of his annualized salary plus one twelfth of accrued annual incentives, if any. We will also be obligated to accelerate all unvested options which Dr. Chain has been granted and to provide Dr. Chain with benefits for the earlier of 18 months from the date of termination or the date on which he obtains comparable benefits from a subsequent employer.

If Dr. Chain’s employment is terminated within 2 years of a change of control of our company (as such term is defined in the agreement), by us without cause or by Dr. Chain for good reason, Dr. Chain will, in addition to receiving earned and unpaid salary, vacation pay and other benefits as well as incentive awards earned as of December 31 of the prior year, be entitled to receive 200% of his annualized base salary and actual annual incentive, if any, as well as benefits for the lesser of 24 months from the date of termination or the date on which he obtains comparable benefits from a subsequent employer, and we will be obligated to accelerate the vesting of any options and restricted stock which he has been granted. The amended and restated agreement also contains a non-competition provision that prohibits Dr. Chain, if he ceases working for us, from working for our competitors for up to 24 months. We are also obligated to indemnify Dr. Chain if he is made a party, or is threatened to be made a party, to any action, suit or proceeding, by reason of the fact that he is or was a director, officer or employee of ours to the fullest extent legally permitted or authorized by our governing documents.

Elliot Maza. In connection with the merger, we approved an amended and restated employment agreement with Mr. Maza which Intellect had entered into prior to the merger. The amended and restated agreement was effective as of January 15, 2007. Mr. Maza’s original employment agreement with Intellect was entered into May 16, 2006. Prior to the amended and restated agreement, Mr. Maza’s annual salary was $240,000 and in connection with entering into the original agreement in May 2006, Mr. Maza received a one time signing bonus of $25,000. In addition, Mr. Maza was entitled to an option to purchase 400,000 shares of Intellect’s common stock. Mr. Maza agreed to forego this grant in anticipation of the amended and restated agreement. The original agreement had a term ending May 21, 2008 and provided that upon termination without cause by Intellect; Mr. Maza was entitled to receive his base salary for the lesser of twelve months from the termination or the remainder of the agreement term.

Under the terms of the amended and restated agreement, Mr. Maza agreed to continue his employment with Intellect and as a result of the merger became our Executive Vice President and Chief Financial Officer. Pursuant to the amended and restated agreement, Mr. Maza will receive an annual base salary of not less than $300,000 per year, plus reimbursement of all ordinary and reasonable out-of-pocket business expenses he incurs and reimbursement for automobile expenses and individual life insurance of up to $28,000 annually. Mr. Maza is eligible to participate in an annual incentive plan which we are required to establish by July 13, 2007. During 2009, Mr. Maza voluntarily accepted a reduction in salary to $270,000 because of the weak financial condition of the Company.  Under the amended and restated agreement, Mr. Maza is entitled to receive a grant of stock options equal to 5% of our outstanding shares of common stock on a fully diluted basis. These options were granted January 25, 2007 and were fully vested as of the date of grant. The agreement also provides that Mr. Maza is entitled to six weeks vacation and to participate in pension and welfare plans as are made available to senior level executives.

The amended and restated agreement is for an initial term of five years and automatically renews each year thereafter unless terminated by either party by written notice given at least 180 days prior to the expiration of the agreement. We may not terminate the agreement without cause until the end of the initial term. Mr. Maza may terminate this agreement on 10 days prior written notice to us.

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The agreement may be terminated for cause (as defined in the agreement). If we terminate Mr. Maza’s employment without cause or if Mr. Maza terminates his employment for good reason (as defined in the agreement), we will be obligated to, in addition to paying him earned and unpaid salary, vacation pay and other benefits as well as incentive awards earned as of December 31 of the prior year, continue Mr. Maza’s benefits and pay Mr. Maza a monthly payment for 18 months from the date of his termination equal to one-twelfth of his annualized salary plus one twelfth of accrued annual incentives, if any. We will also be obligated to accelerate all unvested options which Mr. Maza has been granted and to provide Mr. Maza with benefits for the earlier of 18 months from the date of termination or the date on which he obtains comparable benefits from a subsequent employer.

If Mr. Maza’s employment is terminated within 2 years of a change of control of our company (as such term is defined in the agreement), by us without cause of by Mr. Maza for good reason, within 2 years of a change in control, Mr. Maza will, in addition to receiving earned and unpaid salary, vacation pay and other benefits as well as incentive awards earned as of December 31 of the prior year, be entitled to receive 200% of his annualized base salary and actual annual incentive (if any) as well as benefits for the lesser of 24 months from the date of termination or the date on which he obtains comparable benefits from a subsequent employer, and we will be obligated to accelerate the vesting of any options and restricted stock which he has been granted.

The agreement also contains a non-competition provision that prohibits Mr. Maza, if he ceases working for us, from working for our competitors for up to 24 months. We are also obligated to indemnify Mr. Maza if he is made a party, or is threatened to be made a party, to any action, suit or proceeding, by reason of the fact that he is or was a director, officer or employee of ours to the fullest extent legally permitted or authorized by our governing documents.

Potential Termination

The termination payments set forth in this table are based on the amended and restated agreements with Dr. Chain and Mr. Maza entered into on January 25, 2007.

Name	Potential Severance Payments ($)
Daniel Chain		675,000	(1)
Elliot Maza		450,000	(2)

(1)           Assumes that Dr. Chain is terminated pursuant to his agreement at June 30, 2009

(2)           Assumes that Mr. Maza is terminated pursuant to his original agreement at June 30, 2009.

Outstanding Equity Awards At Fiscal Year End

Option grants prior to the merger. GlobePan had no outstanding equity awards prior to the merger. In connection with the merger, we assumed 1,207,501 options granted by Intellect under Intellect’s 2005 Equity Incentive Award Plan (including options granted to directors as disclosed below). None of such awards had been made to our named executive officers.

Option grants following the merger. Immediately following the merger, we granted a total of 38,000 options under the 2005 option plan, which we assumed in connection with the merger. In connection with the merger, we also adopted a 2006 Equity Incentive Plan pursuant to which we may grant options to purchase a total of 12,000,000 shares of our common stock. Subsequent to the adoption of such plan, we granted 11,577,952 options to purchase shares of our common stock under such plan.

The following table generally sets forth the number of outstanding equity awards that have not been earned or vested or that have not been exercised for each named executive officer as of June 30, 2009:

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Outstanding Equity Awards At Fiscal Year End Table

Name	Number of securities underlying unexercised options (#) exercisable		Number of securities underlying unexercised options (#) unexercisable		Option exercise price		Option expiration date
Daniel Chain, Chief Executive Officer and Chairman of the Board of Directors		6,995,247		-	$	0.78	1/25/2017
Elliot Maza, President, Chief Financial Officer and Director		3,041,898		-	$	0.78	1/25/2017

Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The following table sets forth certain information as of June 30, 2009, regarding the beneficial ownership of shares of our common stock by each person known to us to be the beneficial owner of more than 5% of our common stock, each of our named executive officers, each member of our board of directors, and all members of our board of directors and executive officers as a group.

Beneficial ownership is determined in accordance with rules promulgated under the Exchange Act and generally includes voting and/or investment power with respect to securities. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of common stock issuable upon the exercise of stock options, warrants or the conversion of other securities held by that person that are currently exercisable or convertible, or are exercisable or convertible within 60 days, are deemed to be issued and outstanding.

Name and Address	Amount and Nature
of Beneficial Holder (1)	of Beneficial Ownership			Percent of Class (2)
Margery Chassman		2,245,530	(3)		6.80	%
465 W 23rd Street
Suite 12J
New York, New York 10011
Margaret Germain		5,215,753	(4)		16.91	%
8 Olmstead Street
Scarsdale, NY 10583
Mark Germain, J.D.		5,215,753	(5)		16.91	%
8 Olmstead Street
Scarsdale, NY 10583
Harvey L. Kellman		762,500	(6)		2.46	%
Kelvin Davies, Ph.D.		300,000	(7)		0.96	%
Kathleen P.Mullinix, Ph.D.		200,000	(7)		0.64	%
William Keane		200,000	(7)		0.64	%
Daniel G. Chain, Ph.D.		11,995,247	(8)		31.70	%
Elliot Maza		3,041,898	(9)		8.98	%
Directors and executive officers as a group (6 persons)		16,499,645	(10)		37.55	%

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(1)           Except as otherwise noted, the address of record of each of the following individuals is: c/o Intellect Neurosciences, Inc., 7 West 18th St. 9th Fl., New York, New York 10011.

(2)           Percentages based on 30,843,873 shares of common stock issued and outstanding as of June 30, 2009, including, as applicable, those shares that may be acquired within 60 days upon the exercise of stock options, warrants and/or the conversion of convertible securities by the relevant stockholder.

(3)           Includes 2,245,530 shares of common stock which may be acquired within 60 days upon the conversion of convertible promissory note.

(4)           Includes 2,065,753 shares of common stock owned by Ms. Germain’s spouse, Mark Germain, and an aggregate of 1,350,000 shares of common stock which are owned by two of Ms. Germain’s children. Ms. Germain expressly disclaims beneficial ownership of the shares owned by her spouse and children.

(5)           Includes 1,800,000 shares of common stock owned by Mr. Germain’s spouse, Margery Germain, and an aggregate of 1,350,000 shares of common stock which are owned by two of Mr. Germain’s children. Mr. Germain expressly disclaims beneficial ownership of the shares owned by his spouse and children.

(6)           Includes 762,500 shares of common stock including those which may be acquired within 60 days upon the exercise of stock options.

(7)           Includes 200,000 shares of common stock which may be acquired within 60 days upon the exercise of stock options.

(8)           Includes 6,995,247 shares of common stock which may be acquired within 60 days upon the exercise of stock options.

(9)           Includes 3,041,898 shares of common stock which may be acquired within 60 days upon the exercise of stock options.

Item 13.  Certain Relationships and Related Transactions, and Director Independence.

We describe below any transactions, arrangements or relationships of which we are aware, as of the date of filing of this current report, which occurred since our inception or are currently proposed to which we are or will be a participant (as defined in Item 404 of Regulation S-K); in which the amount involved exceeded or will exceed $120,000; and in which any related person (as defined in Item 404 of Regulation S-K) has or will have a direct or indirect material interest. We include in the description below transactions involving certain of our founders and control persons.

Certain Relationships Involving Margie Chassman and David Blech

Ms. Margie Chassman is one of our founding principal stockholders and is the spouse of Mr. David Blech.

David Blech Consulting Services. David Blech has provided significant consulting services to us. Specifically, he has assisted us in arranging the merger and has arranged for third parties to invest the majority of the funds that we have raised to date. Mr. Blech has also introduced us to potential placement agents, investors and merger partners, including GlobePan. Mr. Blech also introduced us to almost all of the institutional investors that purchased the Series B Preferred Stock and Convertible Notes issued by Intellect prior to the merger. Mr. Blech also assisted us in structuring these transactions. Several of these investors have co-invested with Ms. Chassman in other transactions. Other than to the extent Mr. Blech may profit from the other transactions described herein, neither we nor Intellect nor, to our knowledge, GlobePan, compensated or plan to compensate Mr. Blech in exchange for his consulting services, including his introduction of GlobePan to Intellect. We have been informed that Ms. Chassman has operated a small graphic design business for at least fifteen years and, for at least the last seven years, has invested in numerous early stage biotechnology and information technology companies. Ms. Chassman has also informed us that her portfolio of investments, exclusive of her investment in Intellect, is currently worth in excess $25,000,000.

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Mr. Blech’s Background. In May 1998, David Blech pled guilty to two counts of criminal securities fraud and, in September 1999, he was sentenced by the United States District Court for the Southern District of New York to five years probation, which was completed in September 2004. Mr. Blech also settled administrative charges by the SEC in December 2000 arising out of the collapse in 1994 of D. Blech & Co., of which Mr. Blech was president and the sole stockholder. The settlement prohibits Mr. Blech from engaging in future violations of the federal securities laws and from association with any broker-dealer. In addition, the District Business Conduct Committee for District No. 10 of NASD Regulation, Inc. reached a decision, dated December 3, 1996, in a matter entitled District Business Conduct Committee for District No. 10 v. David Blech, regarding the alleged failure of Mr. Blech to respond to requests by the staff of the National Association of Securities Dealers, Inc. (NASD) for documents and information in connection with seven customer complaints against various registered representatives of D. Blech & Co. The decision found that Mr. Blech failed to respond to such requests in violation of NASD rules and that Mr. Blech should, therefore, be censured, fined $20,000 and barred from associating with any member firm in any capacity. Furthermore, Mr. Blech was discharged in bankruptcy in the United States Bankruptcy Court for the Southern District of New York in March 2000. Since 1980 Mr. Blech has been a founder of companies and a venture capital investor in the biotechnology sector. His initial venture investment, Genetic Systems Corporation, which he helped found and served as treasurer and a member of the board of directors, was sold to Bristol Myers in 1986 for $294 million of Bristol Myers stock. Other companies he helped found include DNA Plant Technology, Celgene Corporation, Neurogen Corporation, Icos Corporation, Incyte Pharmaceuticals, Alexion Pharmaceuticals and Neurocrine Biosciences. He was also instrumental in the turnaround of Liposome Technology, Inc. and Biotech General Corporation. In 1990, Mr. Blech founded D. Blech & Company, which, until it ceased doing business in September 1994, was a registered broker-dealer involved in underwriting biotechnology issues. See “Risk factors—The regulatory background of the spouse of one of our founding principal stockholders may make it more difficult for us to obtain listing on Nasdaq or another securities exchange.”

Significant stockholder. Prior to the merger, Ms. Chassman beneficially owned 17.55% of Intellect’s common stock, including shares issuable upon the conversion of convertible notes held by Ms. Chassman and by a trust, for which Ms. Chassman serves as Trustee and of which one of Mr. Blech’s sons is a beneficiary. Immediately following the merger, Ms. Chassman beneficially owned, as determined under applicable SEC rules, approximately 14.37% of our common stock, including shares issuable upon the conversion of convertible notes held by Ms. Chassman, the trust which Ms. Chassman serves as Trustee and of which one of Mr. Blech’s sons is a beneficiary, and another trust of which a son of Ms. Chassman and Mr. Blech is a beneficiary. Ms. Chassman has expressly disclaimed beneficial ownership of certain of the shares that applicable SEC rules deem her to beneficially own. See “Item 12 - - Security ownership of certain beneficial owners and management and related stockholder matters.”

Pre-merger escrow arrangements. We have been notified that, prior to the merger, a number of GlobePan’s stockholders transferred their stockholdings in GlobePan to third parties pursuant to escrow arrangements. We are not aware of the final terms of the transfers. As a result of these transfers, family members of Ms. Chassman and Mr. Blech, among other parties, became stockholders of GlobePan prior to the merger. Collectively, these family members beneficially owned 11.0% of GlobePan’s issued and outstanding common stock prior to the merger and 12.07% of our issued and outstanding common stock following the merger. Based on information available to us, under applicable SEC rules for determining beneficial ownership, we do not believe that any of the shares of our common stock that is beneficially owned by any of these family members is deemed to be beneficially owned by Ms. Chassman or Mr. Blech.

Stockholder loans to fund operations. During the fiscal year ended June 30, 2007, we borrowed a total of $1,279,000 from certain of our principal shareholders to fund our operating costs. The loans are evidenced by convertible notes that are payable within one year and bear interest annually at 8%. The number of shares of our common stock to be issued pursuant to these notes is equal to the outstanding principal and accrued interest on each note at the date of conversion divided by $1.75. As of June 30, 2007, notes with an aggregate face amount of $300,000 had been repaid.

During the fiscal year ended June 30, 2008, we borrowed an additional $3,338,828 from these shareholders evidenced by notes with the same terms as described above. As of June 30, 2008, notes with an aggregate face amount of $894,000 had been repaid.

During July, 2008, we borrowed an additional $75,000 from these shareholders evidenced by notes with the same terms as described above.

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On May 2, 2008, our  Board approved a term sheet (the “Term Sheet”) containing the material terms of a transaction (the “Transaction”) to be entered into among the Company, as obligor, and certain existing shareholders of and lenders to the Company (the “Existing Investors”) and any other lenders who participate in the Transaction (together with the Existing Investors, the “Lenders”). Certain of the existing Investors are the “principal shareholders” referred to above.

Pursuant to the Term Sheet, the Existing Investors, who held convertible promissory notes with an aggregate face amount of approximately $3,500,000 plus accrued interest (the “Convertible Notes”) as of March 2008, and other Lenders agreed to lend an additional $1,500,000 to $2,225,000 to the Company during the period commencing April 15, 2008 and ending on September 1, 2008. As consideration for the loans, we agreed to exchange the outstanding Convertible Notes for a new senior note (the “Senior Note Payable”), 3,271,429 warrants to purchase our common stock and the right to participate in future royalties, if any, received by us from the license of our ANTISENILIN patents and patent applications (the “Royalty Participation”).

The Senior Note Payable has a maturity date of July 31, 2013 and bears interest at 10% per annum payable in registered common stock of the Company or cash, at the Company’s option. The warrants will have an exercise price of $1.75 per common share and contain full anti-dilution protection. The Royalty Participation will entitle the Lenders to 25% of royalties received by the Company from a license of the ANTISENILIN patent estate in perpetuity.

Effective as of July 31, 2008, the principal shareholders referred to above, together with the other Lenders exchanged their Notes for Senior Notes Payable pursuant to the term sheet described above. We issued to the Lenders  (including the principal shareholders)  new Senior Notes Payable with an aggregate face amount of $5,725,000 dated as of July 31, 2008, together with 3,271,429 warrants, and granted these holders and lenders the right to receive 25% of future royalties that we receive from the license of our ANTISENILIN patent estate.

On March 22, 2009, in connection with the settlement of note holder litigation described above in Item 3, Legal Proceedings, Margie Chassman, one of our principal shareholders purchased from the holder a Note, then in default, and agreed to cancel the Note. In exchange, we issued Ms. Chassman an additional Senior Note with a face amount of $310,000 and repaid $100,000 of Notes held by Ms. Chassman. We did not issue any additional warrants to the shareholder.

At June 30, 2009 and 2008, Senior Notes Payable to related parties of $3,808,828 and $0.0, respectively, were outstanding.

On August 12, 2009, we issued and sold a 10% Senior Promissory Note (the “Note”) with a principal amount of $450,000, resulting in net proceeds of approximately $360,000. The Note bears interest at 10% annually and matures upon the earlier of 6 months from the date of the Note or the closing of an equity financing with gross proceeds to us of at least $1,125,000 (the “Liquidity Event”).  The payment and performance obligations of the Company under the Note are guaranteed by Margie Chassman, a principal shareholder of the Company.  In consideration of the guaranty provided by Ms. Chassman, we paid her a fee of $30,000.

Certain Relationships Involving Dr. Daniel G. Chain

Dr. Daniel G. Chain is one of our founders and significant stockholders and serves us as Chairman of the Board and Chief Executive Officer.

Stockholder. Prior to the Merger, Dr. Chain beneficially owned 19.84% of Intellect’s common stock. Immediately following the merger, Dr. Chain beneficially owned approximately 28.84% of our common stock deemed, pursuant to applicable SEC rules, to be issued and outstanding, including those shares of common stock issuable upon the exercise of stock options or warrants or the conversion of other securities that are exercisable or convertible by Dr. Chain within 60 days. Dr. Chain is the record owner of 5,000,000 shares of our common stock and also owns currently exercisable stock options covering 6,995,247 shares of our common stock. Dr. Chain has expressly disclaimed beneficial ownership of the shares owned by Schole Investments Limited. See “Item 12 - Security ownership of certain beneficial owners, management and related stockholder matters.”

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Dr. Benjamin Chain — Chimeric Peptide Assignment License Agreement. Dr. Benjamin Chain is Dr. Daniel Chain’s brother. Dr. Benjamin Chain serves us as a member of our Scientific Advisory Board. Dr. Benjamin Chain is the inventor of our RECALL-VAX technology platform. In 2000, Dr. Benjamin Chain assigned to Mindset all of his right, title and interest in certain of his patented inventions related to the use of chimeric peptides for the treatment of Alzheimer’s disease. In exchange for such assignment, Mindset agreed to pay a royalty to Dr. Benjamin Chain equal to 1.5% of net sales of any drug products sold or licensed by Mindset utilizing the chimeric peptide technology. Also in 2000, Dr. Benjamin Chain and Mindset entered into an assignment agreement, dated as of June 6, 2000, pursuant to which Dr. Benjamin Chain assigned to Mindset all of his right, title and interest in, to and under certain inventions relating to chimeric peptides as described in a United States patent application filed on December 3, 2000, which is the patent underlying RECALL-VAX. Pursuant to the 2005 Asset Transfer, the rights and obligations of Mindset under the assignment agreement were assigned to us. In consideration for the assignment of the patent application, with respect to each product covered by the patent, we are required to pay Dr. Benjamin Chain a 1.5% royalty on the net sales of the patented products covered by the agreement. Under the agreement, net sales is the total amount invoiced in connection with sales of the product after the deduction of credits and allowances or adjustments, trade and cash discounts, sales, tariff duties and outbound transportation, as detailed in the agreement. The agreement continues on a country-by-country basis, if not previously terminated, until the later of 10 years from the date the product is first sold, marketed or publicly made available for sale in such country or the expiration date of the patent. The license agreement expires upon the expiration date of the last to expire patent or 15 years from the date of first commercial sale of products, whichever is later.

Certain Relationships Involving Mark Germain

Mark Germain is one of our founders and a significant stockholder. He also serves as a consultant to the Company. Mr. Germain’s spouse, Margery Germain, is also one of our principal stockholders.

Stockholder. Prior to the merger, Mr. Germain and Ms. Germain shared beneficial ownership of approximately 20.00% of Intellect’s common stock, including 2,065,753 shares of common stock held by Mr. Germain and 1,800,000 shares of common stock held by Ms. Germain. In addition, two of their children were the record owners of an aggregate of 1,350,000 shares of Intellect common stock. Each of Mr. Germain and Ms. Germain is deemed, pursuant to applicable SEC rules, to share beneficial ownership of the shares of our common stock held of record by the other and by their two children. Immediately following the merger, Mr. Germain and Ms. Germain shared beneficial ownership of approximately 14.87% of our common stock deemed, pursuant to applicable SEC rules, to be issued and outstanding, including those shares of common stock issuable upon the exercise of stock options, warrants or the conversion of other securities that are exercisable or convertible by Mr. Germain or Ms. Germain within 60 days. As of June 30, 2009, Mr. Germain is the record owner of 2,065,753 shares of our common stock and Ms. Germain is the record owner of 1,800,000 shares of our common stock. Mr. Germain and Ms. Germain’s two children are the record owners of an aggregate of 1,350,000 shares of our common stock. Mr. Germain and Ms. Germain have expressly disclaimed beneficial ownership of certain of the shares that applicable SEC rules deem them to beneficially own.

Consulting Services and Fees. We are party to a consulting agreement with Mr. German pursuant to which Mr. Germain is entitled to consulting fees of $120,000 per year, payable at the rate of $10,000 per month, beginning in January 2006 plus, to the extent permitted under our applicable group health insurance policy, health insurance coverage for Mr. Germain and his family without any reimbursement from him. Under this consulting agreement, Mr. Germain also is entitled to receive cash payments in an amount equal to 2.5% of all revenues received by us (excluding revenues from the issuance of securities). The amounts payable under the consulting agreement may not exceed $1 million, at which time the consulting agreement will terminate. Fees previously paid to Mr. Germain, as well as the value of health insurance provided by us to Mr. Germain and his family and revenue participation payments are accounted for as fees paid toward the $1 million maximum amount. As of the date of this Annual Report on Form 10-K, we have paid approximately $119,000 to Mr. Germain, all of which is treated as fees paid pursuant to the consulting agreement.

Lease Guarantor. As an inducement for the landlord of our New York headquarters facilities to enter into a lease with us for those premises, Mr. Germain gave a personal guaranty to the landlord for the rental and other payments we owe under the lease. We have not been nor are we now in default under this lease. Annual lease payments under this lease amount to approximately $142,000.

Item 14. Principal Accountant Fees and Services.

The Audit Committee selected Paritz and Company, P.A., an independent registered public accounting firm, as our independent auditors for the year ended June 30, 2009 and Eisner LLP as our independent auditors for the year ended June 30, 2008. The following table sets forth fees for professional services rendered by Eisner LLP for the audit of our financial statements for the year ended June 30, 2008 and for the review of our quarterly financial statements for certain quarterly periods in the year ended June 30, 2009, and fees for professional services rendered by Paritz & Company, P.A. for the audit of our financial statements for the ended June 30, 2009 and for the review of our quarterly financial statements for certain quarterly periods in the year ended June 30, 2009.

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	Year ended June 30, 2009		Year ended June 30, 2008
Audit Fees - Eisner, LLP (1)	$	270,550	$	255,066
Audit Fees - Paritz & Company P.A. (1)		15,000		-
Tax Fees (2)		10,000		10,000
All Other Fees		-		-
Total Fees	$	295,550	$	265,066

(1)    Represents fees for professional services provided in connection with the audit of our financial statements for the fiscal periods presented and the review of our quarterly financial statements during those periods. Includes fees related to the private companies.

(2)   Represents fees for professional services and advice provided in connection with our federal and state tax returns.

Audit Committee Pre-Approval Policies

Rules adopted by the SEC in order to implement requirements of the Sarbanes-Oxley Act of 2002, as amended, require public company audit committees to pre-approve audit and non-audit services. Effective as of March 1, 2007, our Audit Committee has adopted a policy for the pre-approval of all audit, audit-related and tax services, and permissible non-audit services provided by our independent auditors. The policy provides for an annual review of an audit plan and budget for the upcoming annual financial statement audit, and entering into an engagement letter with the independent auditors covering the scope of the audit and the fees to be paid. Our Audit Committee may also from time-to-time review and approve in advance other specific audit, audit-related, tax or permissible non-audit services. In addition, our Audit Committee may from time-to-time give pre-approval for audit services, audit-related services, tax services or other non-audit services by setting forth such pre-approved services on a schedule containing a description of, budget for and time period for such pre-approved services. The policies require our Audit Committee to be informed of each service and the policies do not include any delegation of our Audit Committee’s responsibilities to management. Our Audit Committee may delegate pre-approval authority to one or more of its members. The member to whom such authority is delegated will report any pre-approval decisions to our Audit Committee at its next scheduled meeting.

PART IV

Item 15.               Exhibits and Financial Statement Schedules.

The exhibits filed or furnished with this Form 10-K are shown on the Exhibit List that follows the signatures hereto, which list is incorporated herein by reference.

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EXHIBIT INDEX

2.1	Agreement and Plan of Merger, dated as of January 25, 2007, by and among GlobePan Resources, Inc., INS Acquisition, Inc., and Intellect Neurosciences, Inc. 2
2.2	Sale, Assignment, Assumption and Indemnification Agreement, dated January 25, 2007, by and between GlobePan Resources, Inc. and Russell Field 2
3.1	Plan of Conversion of GlobePan Resources, Inc. (Nevada), dated January 24, 2007 1
3.2	Articles of Conversion for GlobePan Resources, Inc. (Nevada), dated January 24, 2007 1
3.3	Certificate of Conversion for GlobePan Resources, Inc. (Nevada), dated January 24, 2007 1
3.4	Certificate of Incorporation of GlobePan Resources, Inc. (Delaware), dated January 24, 2007 1
3.5	Certificate of Merger of INS Acquisition, Inc. with and into Intellect Neurosciences, Inc., dated January 25, 2007 2
3.6	Bylaws of GlobePan Resources, Inc., dated January 25, 2007 1
3.7	Certificate of Amendment to Certificate of Incorporation of GlobePan Resources, Inc., dated January 26, 2007 2
3.8	Certificate of Designation of Series B Convertible Preferred Stock of the Company 4
4.1	Form of Employee Incentive and Nonqualified Stock Option Agreement under the 2005 Stock Option Plan 2
4.2	Form of Director Stock Option Agreement under the 2005 Stock Option Plan 2
4.3	Form of Notice of Stock Option Award under 2006 Equity Incentive Plan 2
4.4	Form of Convertible Note Warrant 2
4.5	Form of Convertible Note Warrant 2
4.6	Form of Series B Warrant 2
4.7	Form of Extension Warrant 2
4.8	Form of Exchange Agreement by and between the Company and certain holders of common stock of the Company 4
4.9	Form of Convertible Promissory Note5
4.10	Form of Warrant5
10.1	Form of Indemnification Agreement by and between Intellect Neurosciences and each of: Kelvin Davies, William P. Keane, Harvey L. Kellman, Elliot Maza, Kathleen P. Mullinix, Eliezer Sandberg and David Woo 2

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10.2	2005 Employee, Director and Consultant Stock Option Plan 2
10.3	2006 Equity Incentive Plan 2
10.4	Amendment No. 1 to the 2006 Equity Incentive Plan 4
10.5	Asset Transfer Agreement, dated as of June 23, 2005, by and between Intellect Neurosciences, Inc. and Mindset Biopharmaceuticals (USA), Inc. 2
10.6	License Agreement by and between New York University and Mindset Limited, effective as of August 10, 1998; Amendment to the 1998 Agreement, effective as of September 2002 2, 3
10.7	Research and License Agreement by and between the South Alabama Medical Science Foundation and Mindset Limited, effective as of August 10, 1998 (the “1998 Agreement”); Amendment I to the 1998 Agreement, effective as of September 11, 2000 (the “Amendment I”); and Amendment II to the 1998 Agreement, effective as of September 1, 2002 2, 3
10.8	Transgenic Animal Non-Exclusive License and Sponsored Research Agreement, dated as of October 24, 1997, by and between Intellect Neurosciences, Inc. and Mayo Foundation for Medical Education and Research 2
10.9	Assignment Agreement, dated as of June 6, 2000, by and between Mindset Biopharmaceuticals (USA), Inc. and Dr. Benjamin Chain 2
10.10	Research and License Agreement by and between New York University and Intellect Neurosciences, Inc., effective as of April 1, 2006 2, 3
10.11	Beta-Amyloid Specific, Humanized Monoclonal Antibody Purchase and Sale Agreement effective as of December 26, 2006 by and between the Company and Immuno-Biological Laboratories Co., Ltd. 3
10.12	Lease Agreement, dated as of July 11, 2005, by and between Intellect Neurosciences, Inc. and Scandia Realty Partnership Limited 2
10.13	English Summary of Israel Lease Agreement in Hebrew Language by and between Intellect Neurosciences (Israel) Ltd. and Africa Israel Nechasim Ltd. 2
10.14	Amended and Restated Employment Agreement, dated as of January 15, 2007, by and between Intellect Neurosciences, Inc. and Daniel Chain 2
10.15	Amended and Restated Employment Agreement, dated as of January 15, 2007, by and between Intellect Neurosciences, Inc. and Elliot Maza 2
10.16	Employment Agreement, dated as of June 25, 2005, by and between Intellect Neurosciences, Inc. and Vivi Ziv 2
10.17	Consulting Agreement, dated as of January 3, 2007, by and between Intellect Neurosciences, Inc. and Mark Germain 2
10.18	Consulting Agreement, dated as of July 1, 2005, by and between Intellect Neurosciences, Inc. and Harvey Kellman 2

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10.19	Consulting Agreement, dated as of December 1, 2005, by and between Intellect Neurosciences, Inc. and Kelvin Davies 2
10.20	License Agreement by and among Intellect Neurosciences, Inc. and AHP Manufacturing BV acting through its Wyeth Medica Ireland Branch and Elan Pharma International Limited, as of May 13, 20086
10.21	Research and Collaboration Agreement by and between Medical Research Council Technology and Intellect Neurosciences, Inc., as of August 6, 20077
10.22	Amendment to Collaborative Research Agreement between Medical Research Council Technology and Intellect Neurosciences, Inc., as of June 19, 20087
10.23	Option & License Agreement by and among Intellect Neurosciences, Inc. and [***], as of October 3, 20088
10.24	Option & License Agreement by and between Intellect Neurosciences, Inc. and Glaxo Group Limited, dated as of April 29, 20099
14.1	Code of Ethics and Business Conduct2
21.1	List of Subsidiaries 2
31.1	Certification pursuant to Rule 13a-14(a) and 15d-14(a) as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
31.2	Certification pursuant to Rule 13a-14(a) and 15d-14(a) as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
32.1	Certification pursuant to Rule 18 U.S.C Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley act of 2002 (filed herewith)
32.2	Certification pursuant to Rule 18 U.S.C Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley act of 2002 (filed herewith)

1  Incorporated by reference to our Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 30, 2007.

2  Incorporated by reference to our Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 31, 2007.

3 Incorporated by reference to our Annual Report on Form 10-K SB, filed with the Securities and Exchange Commission on October 15, 2007. Confidential treatment has been granted for the redacted portions of this agreement. A complete copy of this agreement, including the redacted portions, has been filed separately with the Securities and Exchange Commission.

4  Incorporated by reference to our Current Report on Form 8-K, filed with the Securities and Exchange Commission on July 16, 2007.

5  Incorporated by reference to our Current Report on Form 8-K, filed with the Securities and Exchange Commission on July 3, 2007.

6 Incorporated by reference to our Annual Report on Form 10-K SB, filed with the Securities and Exchange Commission on November 6, 2008. Confidential treatment has been granted for the redacted portions of this agreement. A complete copy of this agreement, including the redacted portions, has been filed separately with the Securities and Exchange Commission.

7 Incorporated by reference to our Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on November 19, 2008. Confidential treatment has been granted for the redacted portions of this agreement. A complete copy of this agreement, including the redacted portions, has been filed separately with the Securities and Exchange Commission.

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8 Incorporated by reference to our Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on February 17, 2009. Confidential treatment has been granted for the redacted portions of this agreement. A complete copy of this agreement, including the redacted portions, has been filed separately with the Securities and Exchange Commission

9 Incorporated by reference to our Annual Report on Form 10-KSB, filed with the Securities and Exchange Commission on October 13, 2009. Confidential treatment has been granted for redacted portions of this agreement. A complete copy of this agreement, including the redacted portions, has been filed separately with the Securities and Exchange Commission

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SIGNATURES

Pursuant to the requirements of  Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: October 13, 2009	INTELLECT NEUROSCIENCES, INC.
	/s/ Daniel Chain
	Daniel Chain
	Chief Executive Officer and Chairman of the Board

In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

SIGNATURES	TITLE	DATE
/s/ Daniel Chain	Chief Executive Officer and Chairman of the Board	October 13, 2009
Daniel Chain
/s/ Elliot Maza
Elliot Maza	President, Chief Financial Officer and Director	October 13, 2009
/s/ Kelvin Davies
Kelvin Davies	Director	October 13, 2009
/s/ William P. Keane
William P. Keane	Director	October 13, 2009
/s/ Harvey L. Kellman
Harvey L. Kellman	Director	October 13, 2009

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LIST OF EXHIBITS

Exhibit Number	Description
10.24	Option & License Agreement by and between Intellect Neurosciences, Inc. and Glaxo Group Limited, dated as of April 29, 20091
31.1	Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended
31.2	Certification of the Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended
32.1	Certification of the Principal Executive Officer pursuant to U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of the Principal Financial Officer pursuant to U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

1 Confidential treatment has been requested for redacted portions of this agreement. A complete copy of this agreement, including the redacted portions, has been filed separately with the Securities and Exchange Commission